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Think Salvador Dali or Vincent Van Gogh have nothing to do with the world of business? Think again.
The following artists have transformed the way the world sees, appreciates, and creates art. Each of these artists had their own share of struggle, turmoil, and rejection. Yet they all remained innovative and daring against the odds. Entrepreneurs and other leaders can learn from their creative strategies.
1. Michelangelo Buonarroti (1475-1564)
Michelangelo needed very little sleep and was usually so drawn up in his work that he would spend weeks in the same clothes and shoes. His servant reported that when Michelangelo did take off his shoes, the skin on his feet would peel off like a snake’s.
Michelangelo was a highly focused artist, but his creativity wasn’t something he took for granted. He wrote, “Critique by creating.”
Michelangelo felt that he could respond to others by doing a better job than they could.
Lesson for leaders: Don’t waste your time criticizing. Start making your own product or solution in response to a poor one. Let your frustration drive you.
2. Vincent Van Gogh (1853-1890)
During Vincent Van Gogh’s lifetime, he sold only one out of the roughly 900 paintings he made. After Van Gough’s death his energetic, captivating style stormed the world and redefined the boundaries of art.
“Occasionally, in times of worry,” Vincent Van Gogh writes to his younger brother, Theo, “I’ve longed to be stylish, but on second thought I say no--just let me be myself--and express rough, yet true things with rough workmanship.”
For Van Gogh, creativity was about honest expression as opposed to style and craft. He wanted to express himself and didn’t care about the quality of his attempts.
Lesson for leaders: If you want to be creative don’t worry about style or what is trending. Focus on what you want to achieve and do it. Don’t worry about the veneer and packaging till after.
3. Henri Matisse (1869-1954)
Matisse wasn’t always a darling of the art world. In 1913 one of his paintings (Nu Bleu) was burned in protest, and he constantly had trouble providing for his family. Yet he retained his artistic temperament and continued to break from classical painting traditions.
Matisse felt that creativity wasn’t a gift or a talent. It was a friend who only stopped by when you were hard at work. Matisse said, “Don’t wait for inspiration. It comes while one is working.”
Lesson for leaders: Don’t wait for inspiration. Get to work and you’ll get creative.
4. Pablo Picasso (1881-1973)
Picasso had many painting styles. When he was a youth, he painted realistically. In his early adulthood he entered his blue and rose periods. After that he made a foray into Cubism. Next, he began to experiment with collage and sculpture.
Picasso was always creating within different styles. Like Matisse, Picasso felt that creativity wasn’t something one could call on whenever. He felt that creativity could only come out when engaged in work. “Inspiration exists,” Picasso says, “but it has to find you working.”
Lesson for leaders: Rolling up your sleeves is the only sure-fire way to become more creative. Like Picasso, always try new things and work within fresh fields.
5. Salvador Dali (1904-1989)
Dali’s melting clocks, capes and eccentric dress, and upturned moustache have made him an iconic artist. And you probably see his work on a daily or weekly basis when you’re checking out the bodega. He designed the Chupa Chups logo.
Dali’s creativity likely stems from brutal honesty with himself. He writes, “Have no fear of perfection. You'll never reach it.” Dali was able to produce more than 1,500 paintings because he was never scared of making mistakes and being less than perfect.
Lesson for leaders: Don’t be afraid to make mistakes.
When do you just need to hang in there, and when are you being strung along? Some tips to get you on the right track.
Over the last 18 years, I have been inside almost every big and small Pharma company pitching a deal of some sort for one company (my own) or another (not my own).
Some years ago I had a very cool technology that would fit perfectly into another company’s product. I contacted the CEO who agreed with me, and we set out to do our due diligence, and, hopefully, close the deal.
While we came to an early understanding of how the companies fit together, the specific terms of the collaboration seemed to take forever to work out. As the months dragged on, I thought daily about calling it quits but pinged the company weekly in hopes of getting to a quicker close. There was even a time when my CFO said, “Let’s at least threaten to walk.” My response was, "Rome wasn’t built in a day."
Each week we made some progress, especially on the trust side. The timeline stretched to nine months, during which I was told that they loved the deal and was motivated but needed more time to work on it internally.
At the end of the sixth month, it finally happened. We heard that the delay had nothing to do with us but everything to do with internal financials. Our patience was rewarded. We got the terms nailed down and signature pages completed. Threatening to walk away would have ruined the trust between us. The deal turned out to be a great opportunity for both parties, as I originally envisioned.
That experience has guided me through all my subsequent transactions, including the road show for my initial public offering, the sale of my company, and the raising of capital for several businesses.
Here are five things I have learned about closing deals:
Start every deal with a clear view of how both sides benefit by knowing the core business. This, to me, is always the hardest analysis. You need to know what the value of the deal is. You can’t ask for less than the project is worth, of course, but overreaching can also kill a deal. Sometimes the added value of the deal is intangible. I try to paint a picture for all showing just that.
The hardest deal to close is the one that you need to stay alive. Never believe that one lost deal will be the downfall of your company.
Work to build trust. Get to know the people you will be in business with and, more importantly, how they work best. Posturing erodes the trust you have built.
Patience is a virtue. No matter how much you want the deal to close quickly, deals always take time, patience and an understanding of what the person on the other side of the table is dealing with internally.
Don’t be biased by your contact’s title. Remember that even if the person across the table isn’t the final decision maker, they will likely be your first internal champion.
Deals never happen quickly or the way you originally envision. But if you approach them in the right way, patience, honesty, and trust can go a long way.
For any leader, passion is the key to success. Here's how to turn inspiration into action while pursuing your goals.
Passion is not just the way to happiness--it's also the fuel that ignites success. Having passion for a particular goal, whether personal or professional, provides the energy and motivation to take the actions necessary to achieve that goal. It's the intangible component that explains why some people and teams are better able to stick with their plans and achieve greater levels of success.
Here are eight strategies that the highest-performing leaders use to get the most from themselves and others.
1. Give passion to get passion.
Think about how you respond to others. Are your responses filled with enthusiasm or are they flat and lifeless? The level of your energy will be reflected back to you--it's your boomerang to the world.
2. Value your values.
Just as important as what you do is how you do it. Living and working in alignment with your values reflects your passion as a person. Living your values also engenders the respect and commitment of others, who will see you as a leader of integrity.
3. Communicate with your community.
The word "communication" comes from the Latin root meaning "community." The best leaders surround themselves with others who share their motivation. Stay connected with your community to find support, to learn, to teach and to remain energized to stick with it.
4. Listen to Yoda.
In the words of the Star Wars Jedi Master Yoda, "Do or do not. There is no try." If you are nervous that your plan won't work, you might find yourself saying, "Okay, I'll try to do it." You are laying the foundation for being unsuccessful from the beginning by giving yourself a way out. Yoda's adage is a passionate reminder that life rewards those who let their actions rise above their excuses.
5. Be still.
Start each day in quiet meditation or prayer. Refresh your mind and refocus your heart on what you are passionate about. Concentrate on one new thing you can do that day to deepen your passion and make progress toward your goal ... even if it's something you don't like to do. Your passion helps you endure those daily disciplines that build the foundation of your success.
6. Enjoy the journey.
If it's only about achieving the goal, you are likely to lose steam along the way. Take time to be a human being, not just a human doing. Although high-achieving leaders have a laser-like focus, they also relish being in the moment. My favorite poem says it best: "Yesterday is history, tomorrow is a mystery, today is a gift ... that's why we call it the Present."
7. Imagine the future.
Visualize the things you will be able to do once you have achieved your goal. Does it feel freeing? What will you be able to do with your precious resources of time, money and energy? This exercise is particularly helpful when you feel the flame of your passion barely flickering.
8. Serve others.
Use your passion to inspire others. After all, great leadership is about others, not about you. Be ready to turn your passion into an example to encourage those around you to pursue their own goals. A true passion, like love, is limitless ... so share it.
Find more strategies for igniting passion in the author's latest book, Stick with It: Mastering the Art of Adherence. Download free book chapters here.
The Harvard Business School professor who coined the term "disruptive innovation" explains that the very way Americans think about finance could be rusting up the economic engine.
If you've been to business school, this definition likely means something to you: "Taking a product and making it simpler and more affordable, so many more people have access to it." Yes, that's Harvard Business School professor Clayton Christensen's definition of disruptive innovation.
Christensen wasn't unaware of the irony when he announced at Tuesday's World Business Forum in New York City that he had a major bone to pick with the teachings of business school professors. Namely, he blamed them for the propagation of economic theories that have contributed to the prolonged U.S. economic slump and slow-to-recover employment numbers following the market downturn of 2007.
To understand this, Christensen says, one must look back to the 1970s, when Milton Friedman and other economists proposed that the goal of a company should be to maximize returns for shareholders. "We now broadly believe that's the responsibility of management," Christensen said. In other words, keeping costs down and cash flow positive, while devoting little or no funding to future innovations, has become the norm at too many American corporations. And that lack of investment in disruptive (or "empowering," as Christensen sometimes has it) innovation is where the real trouble starts.
It's helpful to understand Christensen's theory of the three types of innovation. This is from a piece he published on CNN:The first are "empowering" innovations. These transform complicated, costly products that previously had been available only to a few people, into simpler, cheaper products available to many. The Ford Model T was an empowering innovation, as was the Sony transistor radio. Empowering innovations create jobs for people who build, distribute, sell and service these products.
The second type are "sustaining" innovations. These replace old products with new. The Toyota Prius hybrid is marvelous--yet every time a customer buys a Prius, a Camry is not sold. Sustaining innovations replace yesterday's products with today's products. They keep our economy vibrant--and, in dollars, they account for the most innovation. But they have a zero-sum effect on jobs and capital.
The third type are "efficiency" innovations. These reduce the cost of making and distributing existing products and services--like Toyota's just-in-time manufacturing in carmaking and Geico in online insurance underwriting. Efficiency innovations almost always reduce the net number of jobs in an industry, allow the same amount of work (or more) to get done using fewer people. Efficiency innovations also emancipate capital for other uses. Without them, much of an economy's capital is held captive on balance sheets, tied up in inventory, working capital, and balance-sheet reserves.
We can examine how these innovations function in the U.S. economy as a whole--creating or eliminating jobs, for example--or simply within a single company. At that smaller scale, Christensen says it's up to managers to put into place policies that shape a company's potential for innovation. And, with profits to make andshareholders to please, funding efficiency innovations is a lot more immediately appealing. "Efficiency innovations pay off really quickly. Empowering innovations take five or more years to pay off," Christensen said at the World Business Forum. "So they invest in efficiency innovations, and more capital comes out."
Investing in efficiency innovations can lead to a cycle of increased profits and re-investing in more efficiency. But that cycle vastly decreases investment in the kinds of research-and-development toward longer-term, potentially disruptive innovations--therefore decreasing overall economic growth and job creation. Here, Christensen says, is where America faces a capitalist dilemma. "Because of the way we measure things, it doesn't make sense to do what makes sense," he said.
"My sense is over the last 20 years the American economy has generated about one-third the number of empowering innovations as was historically the case," he said. What's the potential toll of all this lost innovation on the future of the country? Christensen hypothesized: "If you want to know what the future of America looks like, just look at Japan. You can feel the same thing happen in the United States, and I worry a lot about that."
Mark Newman's new $25 million round of funding came easy--for once.
Nine years into building his fast-growing company, which has quadrupled its head-count over the past two years, Mark Newman sounds exhausted and a little giddy: like a man who's just finished his first marathon, or who's been handed $25 million bucks.
The latter's nearly true. Newman's company, HireVue, announces Wednesday that it's raised a fresh round of funding led by Sequoia Capital, with participation from existing investors. The new round almost doubles the venture capital invested in the company; previously, three rounds of funding had amounted to $28 million.
Newman founded HireVue in in 2004 in Salt Lake City with the idea of turning the computer webcam into a sophisticated hiring tool. Today, it offers a suite of sophisticated technologies aimed at making a range of human-resources tasks simpler and more intuitive. It's also extending into the realm of employee-management and employee-interaction, setting it apart further from video-conferencing tools such as Skype, and other competitors, including Interview Stream and Spark Hire.
Employee-search and on-boarding is its specialty, and HireVue--a 2013 Inc. 30 Under 30 honoree that also made the Inc. 500 list of fast-growing companies--is no stranger to growing pains as it's been scaling head-count in recent years. (Sixty percent of the company's 140 employees are based in Salt Lake City, but the others work remotely.) It's planning on using the new cash infusion to hire even more.
"For us, when hiring, people say they want to be part of a startup, and if you have more than 10 or 20 people they say, 'Oh, it's so big now!'" Newman says. "But the vision for HireVue is for the long haul, so hopefully we'll have 1,000 people here eventually."
It's that long view that seemed to attract investors for this round of funding. And, perhaps, why Newman kept his head up through his prior rounds of pitching investors--which weren't so simple.
"In our seed rounds and Series A, we talked to so many investors who didn't think the market was ready for what we were doing and said 'no,'" Newman says. "I always tell everyone that we were part of the '100 No's Club.'"
But some of those "no's" turned into "yeses" over the years. Newman attributes the fact some venture capital firms came back to him and invested in this round of funding, which also included Growth Capital, Granite Ventures, Peterson Ventures and Rose Park Advisors, to the fact he made his goals for the future clear in earlier pitches, saw those goals through, and articulated his results to the investors he'd met previously. His advice to other startup founders upon hearing "no?" Remember "no" isn't synonymous with "never."
"In this round, we had a lot of in-bound interest for the first time, and none of the firms we talked with were new people," Newman says. "It's really important to invest in those relationships, because 'no' is never 'no' forever."
The federal budget impasse may just lead to a much worse--even catastrophic--hit.
The U.S. economy has weathered the Great Recession, four years of weak recovery, and stubbornly high unemployment. But now it faces a self-inflicted wound from a government shutdown.
Starting at midnight last night, 800,000 government workers deemed non-essential to skeleton operations were furloughed or asked to work without pay for an undetermined amount of time. The reason: Republican insistence in trying to overturn the health care policy known as Obamacare, which began operation today.
The longer the political stalemate and government closure, the longer and deeper the impact on the economy and business owners will be. And what's worse: the crisis sets the stage for an even more debilitating economic event, which would be the failure to negotiate the nation's borrowing limit.
"The shutdown will trickle through and affect everybody, starting with those government workers who will be furloughed and stop spending at local businesses," says Mitchell D. Weiss, an adjunct finance professor at the University of Hartford.
And that, combined with a deadlock over the debt ceiling limit, would be "quite serious because they [would] rock the fundamental perception of credit, which is trust," Weiss adds.
The Immediate Economic Implications
The federal government spends $100 billion annually on small business contracts. The budget impasse and government shutdown will first knock the wind from the sails of businesses that work directly with federal government as contractors, and then cause shock waves that ripple out to their vendors, and ultimately to other small businesses and consumers, economists and finance experts say.
The government closure will also create a backlog of loans from the Small Business Association, which will now not go out to small business owners who desperately need the financing from its critical 7(a) and 504 loan programs. Those finance billions of dollars worth of loans annually.
During the last government shut down in 1996, the government closed for 26 days, at an estimated cost of $1.4 billion, according to Congressional Research Service, equal to about $2 billion today, roughly $80 million a day.
Economists estimate that a shutdown of about one month will shave 1.25 percent to 1.5 percent from the GDP, equivalent to the amount lost during the automotive bankruptcy crisis during the Great Recession. In today's environment, with the economy limping along with growth between 1 percent and 3 percent per quarter, the shutdown could cause growth to flatline, or even dip into negative territory.
A Pervasive Small Business Sentiment: Uncertainty
"The shutdown goes back to the downturn we lived through: businesses will be very circumspect about this, and they will be very careful about hiring and expanding and investing in new equipment, and all the rest," Weiss says.
Thirty-eight percent of 1,000 business owners polled September 30 and October 1 by small business network MANTA said they favored a shutdown, while 62 percent said it would negatively affect the economy, and nearly half said it would have a negative impact on their own businesses. American voters were even more adamant, opposing the shutdown 72 percent to 22 percent. They also opposed blocking a debt limit increase by 64 percent to 27 percent, according to Quinnipiac poll released Tuesday.
Reactions from Owners: Dislike and Dismay
"I dont like what is going on by any means," says Larry Miller, founder and chief executive of BNL in Lovettsville, Virginia, which provides systems engineering and program management to the Departments of Defense and Treasury, and the Veterans Administration.
"If I ran my business the way Harry Reid runs the Senate and (John Boehner) is running the House, we would be broke," says Miller, who describes himself as a lifelong conservative Republican. He adds that damage from the shutdown to his fast-growth company, which has a compound annual growth rate of more than 1,000 percent, could last six months to many years.
Joni Green, who says she is an Independent and has supported both parties, is equally dismayed. "I would say to Congress, 'Please think of the American people and the consequences of your choices, and I would tell them to put logic and common sense back into the process, because it has left the building'."
Green is founder and chief executive of Five Stones Research in Brownsboro, Alabama, a 51-employee firm on track for about 9 million in revenue this year. Her company provides information management technology and services to the Department of Defense.
Up Next: the Debt Ceiling Debate
Even worse, the budget impasse sets the stage for a much bigger crisis, which is the potential to default on national debt if the ceiling on borrowing is not lifted. Failure to negotiate would be calamitous for the U.S. economy and potentially the global economy, experts say.
"Default would be catastrophic, and I don't see how the market would recover from this any time soon, because so much is based on the U.S. Treasury and Treasury yield," says Jonathan Citrin, founder and executive chair of investment advisory CitrinGroup and an adjunct professor of finance at Wayne State University.
A government default would inevitably mean higher interest rates, which would increase the cost of borrowing for all small business owners.
U.S. indexes eked out meager gains today, with the Dow rising 0.23 percent. "[Investors] may be saying this is nothing, but they have their fingers on the button and they are just one hiccup away from this market plummeting," Citrin adds.
Before Twitter goes public, it needs a woman on its board. Here are five women worth considering.
Twitter is heading toward an initial public offering, but its board of directors could prove to be a problem. Namely, there are no women. Each of Twitter's seven directors are men.
Whether Twitter wants more diversity is unclear. But as anticipation for its IPO builds, Twitter risks coming under fire for being a boy's club--the way Facebook did before it hired chief operating officer Sheryl Sandberg.
"You can't be disruptive if you exclude women," says Peggy Wallace, managing partner at Goldenseeds, a New York-based venture capital firm. Plus, Twitter's users are predominantly women--and young, tech savvy women at that, according to Pew Research Center's latest survey of social networking habits. Twitter needs the fairer sex on its side if it hopes to continue to grow and meet shareholder demands.
With the help of experts, we've compiled a list of five women that Twitter--and any tech start-up--would be lucky to have on its board:
Lorrie M. Norrington
As president of eBay International, Norrington oversaw everything from planning to product development for its network of sites in Europe and Asia. When she was promoted to head the North American business unit of eBay Marketplaces, she was a quick study on online shopping and why customers loved it. Such knowledge would be useful to Twitter as it looks to create new revenue streams by catering to local businesses and global brands.
Since becoming chairman of HSN in 2006, Grossman has transformed the home shopping network into a lifestyle powerhouse with sales of $3 billion a year. A 34-year veteran of the retail and apparel industries, Grossman has also held senior positions at Nike, Tommy Hilfiger, and the Polo Jeans Company. That experience would be an asset to Twitter as it markets services to e-commerce sites and retailers. Although Grossman serves on the board of the National Retail Federation and a few other organizations, she may be willing to carve out time to help Twitter go public--something HSN accomplished in 2008.
The chairman of NBCUniversal, Hammer knows media. "She's a real powerhouse," says Janice Ellig, co-chief executive officer of Chadick Ellig, an executive hiring firm in New York. Under Hammer's watch, Syfy became a global brand, USA created a stable of top-rated and award-winning shows, and E! Entertainment transformed into a go-to destination for fans of pop culture. Hammer's media savvy and connections would prove useful as Twitter tackles social TV and tries to make start-up acquisitions like Trendrr, Vine, and MoPub pay off.
Known as the former First Lady of Wall Street, Krawcheck held executive roles at Bank of America and Citigroup. "She's not a digital person," says Ellig, "but sometimes you don't want everybody to be the same so they can raise different issues." Krawcheck is no stranger to regulatory reform and investor protections. She also knows her way around a balance sheet and could certainly help Twitter appeal to female users. She recently acquired 85 Broads, a global women's network.
Who better to advise Twitter than the Silicon Valley icon herself? Yahoo's CEO has proven herself a competent corporate tech strategist. Plus, as an early employee of Google, developing search is in Mayer's blood. That could prove very useful to Twitter, which presumably hopes to make money by placing relevant ads in users' searches. Though she fits the bill, Ellig worries Mayer may be "overboarded." Mayer already holds board seats at Walmart, Jawbone, Cooper-Hewitt, and the New York City Ballet, among several others.
Kevin Ryan argues that investing time in interviewing is essential--and that thorough reference checks are even more important.
Kevin Ryan talks about finding a large-enough market and the qualities to look for in your initial team.
Kevin Ryan answers questions on hiring, brand loyalty programs, advertising, work-life balance, and how you know when an idea isn't working.
For Kevin Ryan, finding problems to solve is the key to starting successful businesses, even in industries he knows little about.
The serial entrepreneur talks to Inc.'s Kimberly Weisul about the lessons he's learned from starting multiple companies, including Gilt Groupe and Business Insider.
Reverse mentors are people younger than you who you admire and learn from. Look to them for inspiration, says the VC.
I make a lot of lists. It's an old habit that I started when I was in grade school. Lists of to-dos, lists of goals, lists of workouts. Lists, lists, lists.
I'm also a nostalgic person, so I tend to save a lot of these lists and use them as touch points for storing memories and keeping track of the passing of time. Every now and then I'll come across an old list and re-read it. Some of them make me think deeply, while others make me laugh at my younger self's absurdity.
Recently, I came across a list in my desk labeled simply “Mentors.” I've had a lot of mentors in my life--many who may not even know they played this role for me. I've always kept an eye on them and noticed the choices they've made and how they've carried themselves personally and professionally.
A number of years ago, I drew up a list of my mentors as it helped crystallize who I truly admire, why I admire them, and what I could learn from them. It was fun to stumble upon that list recently and reflect on my choices.
But, as I read an interview with my friend Barb Goose, the president of Digitas, in which she talks about reverse mentors, I was inspired to draw up a new list.
Reverse mentors are people younger than you who you admire and learn from. Looking back, I found that everyone on my mentor lists were older than me. That was my traditional definition of a mentor--someone ahead of you in life who inspires you, helps guide you, and shows the correct way to live.
When I read Barb's reasoning to seek out reverse mentors--younger folks who she learns from in this rapidly changing, digital world--it really resonated with me. Entrepreneurship, technology, and innovation are profoundly influenced by youth. If you're not tapping into their knowledge base and seeking their insight on trends and opportunities, you're missing out on a valuable resource.
Upon reflection, it's one of the reasons I enjoy teaching so much at Harvard Business School. I learn a tremendous amount from the students. They're always helping me to think about the latest disruptive ideas, technologies, and companies that are emerging. They also challenge me to find the best way to build a start-up and tackle opportunities.
So, now I have my reverse mentor list. I'm tucking it away in my desk for another few years and look forward to tracking the careers and choices of those on it.
This post originally appeared on Jeff Bussgang's blog, Seeing Both Sides.
Plenty of business owners are willing to partially finance the sale of their own companies. Here's how to increase the odds that they will
Even in the strongest economy, it’s hard for would-be business buyers to find financing for their purchases. That’s why so many transactions rely on seller-financing. And while it’s often easier to deal with a business owner seeking an exit than a tight-fisted bank, seller financing comes with its own challenges. Here’s what you need to know if you want a seller to finance at least part of a company sale.
Expect to pay a higher price and interest rate
Remember that for sellers, offering financing to a buyer both increases risk and lowers return (at least in the short term.) It means they won’t receive the full proceeds of a deal at closing, and also requires them to take on more post-sale risk. So if you need seller financing to be part of the deal, be ready to pay a premium. How high a premium? It depends on the particulars of the deal, such as the portion of the sale the seller is willing to finance. Interest on the cash might also be higher than you'd see at a bank.
Prepare to make a substantial down payment
Typically, sellers finance one-third to two-thirds of the sale price. So you’ll need to make a big down payment to help mitigate the seller’s risk and opportunity cost. Be sure to consider how much cash you have for a down payment when determining what you can pay for a business.
Get ready to show your creditworthiness
For the seller, financing is an investment where the return is guaranteed by the buyer’s creditworthiness, repayment ability, and collateral. The expectations may be different than those of a traditional bank, but you still need to prove your creditworthiness by ensuring your credit score is up to par when it comes time to buy.
You’ll also be asked to secure the loan and sign a personal guaranty. In addition to a first mortgage and security interests in the company’s assets, you may be asked to offer personal assets as collateral. If you can provide additional assets to secure the loan, you can reduce the seller’s risk, increase the likelihood of a financed deal, and, potentially, secure more favorable terms, such as a lower purchase price or easier repayment schedule.
Prove you can operate the business
In a seller-financed deal, the seller maintains a stake in the operation until you’ve paid back the loan. As a result, he needs to be confident in your abilities. One way to bolster your credentials is to demonstrate you have the skills and temperament necessary to succeed. If you don’t have previous industry experience, consider compensating the seller to stay on for some time to teach you the ropes.
And as you negotiate, remember that many sellers may not be able to offer financing. If a seller plans to launch another business, for example, seller financing may be off the table. You can increase your odds by working with a business broker to narrow your search to businesses that are willing to consider a seller-financed deal.
Like it or not, you've got to plan for contingencies in case a key team member leaves.
As I have argued before, a few key people in every organization can make a huge difference in its success. This is the case for very large companies, even at a citywide level.
But that doesn't forgive the CEO, the board, or for that matter, anybody in an organization from allowing weak links.
In fact, nearly every team I work with should think about succession planning in the event "that somebody gets hit by a beer truck." (I don't know where I got that phrase, but it's stuck.)
I do know where I learned the lesson of succession planning--when I was 23-years-old at Accenture. On my first project, the partner on my job said, "To be successful you need to become irrelevant."
"Well, your job is to build a team that quickly grows into taking on more of your responsibilities," he responded. "That's the fastest way to move up--when you're not needed anymore. Most managers spend all of their time controlling information and trying to protect their job by not sharing or not delegating. You'll always be small time if you work like that."
That was ingrained in me from then on.
As a first-time CEO, I took that to the next logical conclusion.
It wasn't so much that I wanted to "rise to the next level" as I wanted to lead at a higher level. I did this by making time to spend thinking about how to propel the business forward, rather than having my nose buried in a spreadsheet or having to lead all the big sales campaigns.
So, I tried to build a team that could own my job. And then, my CTO quit.
I had assumed that my core team was with me until the end. The CTO was a super close friend (and former roommate). I honestly had never considered that he would go, so I didn't spend enough time thinking about who would step into his role if he "got hit by a beer truck."
Luckily, we had been working with a contractor who showed great leadership potential. I asked if he wanted the role, and he took it. Still, I had never actively thought about who would step into the role in a tough spot. I had never talked to my CTO about making sure he had no single-points-of-failure on his team, including himself.
From then on, we all talked about it. How did we cross-pollinate skill sets in case our lead DBA left? What happened if our front-end designer gave her two-week's notice? What happens if you get hit by a beer truck?
Ultimately, when I decided to leave the company after six years, I was easily able to hand over the keys and get "promoted" to being a board member.
This is hardest with an early-stage start-up that only has five to ten people. Perhaps redundancy isn't possible at that level.
But when you begin to scale there is simply no excuse for not having succession planning for your direct reports. You need to encourage them to think about this within their own teams.
Besides, cross-pollinating skills is good for teams.
And as a board, it is our responsibility to ask the tough questions. All it takes is one critical departure in one organization I'm involved with to get the reminder: Firefighting is never fun.
This article originally appeared on Mark Suster's blog, Both Sides of the Table.
Intuit recently overhauled its flagship bookkeeping software. Here's a look at what to expect from the new version.
I have now processed 3,000 invoices in my writing career. That's 8,000 articles in total over a period of 12 years. It's amazing I've actually kept track of them all.
In my early days, it was all thanks to Quickbooks Online. I imagined having a retirement banquet someday where I'd thank my editors, my readers, and Quickbooks. The program proved to be sturdy and reliable--it became my best business ally.
That is, until I ditched it sometime last decade. I can't tell you the exact date but after about 1,000 invoices, something went horribly wrong with my data.
I salvaged most of the invoices, but it was time to move on. I switched to Microsoft Small Business Accounting because they offered a free version. (The product is now defunct.) After many happy years processing invoices and running detailed profit and loss statements, something I did just for the entertainment value, I decided to make another switch.
This time, I wanted something, well, fresh. I picked Freshbooks.com. The app runs smoothly in Google Chrome, supports multiple currencies, can generate my detailed financial reports, and has a simple design scheme that makes invoicing less of a chore.
But recently Quickbooks caught my attention again.
Intuit did a complete overhaul of Quickbooks Online. It's absolutely brilliant. It's like Apple swooped in and solved all of the problems in Windows 8. I think even Inc. contributor and 37signals founder Jason Fried would be happy with this one from a design standpoint. The new app works in Chrome, runs on the iPhone, iPad, and Android tablets and phones for easy access, and is now incredibly intuitive. I decided to give it a whirl.
The main selling point here is that you can login quickly from any device, generate an invoice, run a quick customer report, and get back to work again.
I was a little confused initially, though. My theory is that most business owners go into an accounting program to make an invoice so the company can get paid. (Call me old-fashioned, but that seems important.) So I had to search for a moment to find the plus sign in the middle top of the screen and click Invoice. In Freshbooks, there's a more obvious Invoices tab and a big New button to create an invoice.
I also didn't find any easy way to import my existing accounting data. I know I can export a comma-delimited file and manually recreate my accounting data, but that's not exactly high on my priority list right now. Intuit claims the new Quickbooks Online is much more open and has the APIs to prove it. I'm not sure if Freshbooks will be compelled to make a Quickbooks Online exporter (right now, it appears to have one only for Quickbooks Pro 2004).
But I might just switch. Quickbooks Online Plus uses a trendy color scheme (mostly greys, blues, and greens, plus a few other eye-catching colors) that pop off the screen. On the left, there are tabs for customers, vendors, and employees. The idea is not to overwhelm you with incredibly detailed features but to make the accounting process easier. Still, you can run reports like an accounts payable aging summary, track sales tax usage, and even sync with third-party apps like Bill.com or a time-sheet tracker.
FCi Federal focuses on a type of government contract not affected by the Congressional budget fight. The shutdown will be a lot easier for it to navigate.
Congress is at a stale mate. The federal government is shut down. Employees are being furloughed, citizens face shuttered offices, and contractors find the federal spigot suddenly shut off.
Unless, that is, those contractors followed a strategy that looks pretty darn smart right about now.
Meet Sharon Virts-Mozer, the founder and CEO of FCi Federal, which provides "back office" services to federal government agencies like the State Department and U.S. Coast Guard. Despite the fact that the vast majority of the company's $85 million in revenue depends on government funding, Virts-Mozer is confident that her firm will make it through the shutdown just fine.
The Reason? The Strategy Fit for a Budget Fight
FCi Federal goes after federal contracts that are funded not by the general discretionary budget--the one House Republicans and the Democratic Senate could not agree on--but from money the government collects for providing certain public services.
This includes the $135 in fees the government makes when someone gets a U.S. passport, say, or the $340 filing fee it earns from immigrants who apply for a green card to become a permanent U.S. resident, among other products and services users pay for.
Those programs generally keep moving forward even in a shutdown because they bring in revenue. "Nobody wants those fees not being deposited to the U.S. Treasury," says Virts-Mozer.
Lessons From the Last Government Shutdown
Virts-Mozer started her career as a government intern at the U.S. Department of Housing and Urban Development, and then became a contract worker at the Internal Revenue Service. Immersed in bureaucracy, she says she realized that there simply had to be a better way.
She launched FCi Federal in 1991--"at age 29, divorced, with two kids in diapers"--as a consulting firm showing other companies how to get federal contracts.
Four years later, she saw what her clients went through during the 28-day government shutdown in December 1995 and January 1996. So, when she shifted gears and decided to compete for contracts directly in 2005, she knew which budget to avoid.
"They were hurting," she recalls. "I didn't want to be subject to the whims of Congress and the White House and all that. I don't want to be held hostage."
Still, FCi Is Not Entirely Immune
While 92 percent of FCi Federal's contracts are the fee-for-service type in the immigration and law enforcement fields, it has another eight percent that are not, so some of the company's 1,450 employees will wind up furloughed.
In some of FCi's functions, its employees work day-to-day in government offices such that most customers--the applicants filling out forms with U.S. Citizenship and Immigration Services, for example--never have any idea they're dealing with a private company under contract with the government.
Virts-Mozer said she and the others in her C-suite met yesterday to try to figure out how much of the difference they'll be able to make up in pay for those workers.
Broader Economic Implications: The DC Area Hit Hard
According to The Washington Post, while all State Department employees will remain on duty, at least in the short-term, and uniformed members of the military will be paid, other agencies will lose almost everyone. As of Tuesday, there will be only 349 employees nationwide on duty at the Department of Housing and Urban Development, 242 at the Department of Education, and 549 at NASA.
Overall, the District of Columbia and surrounding area will be hit hard. The shutdown will cost the Washington region $200 million a day, and, paradoxically, will cost the government more than it would spend staying open.
"I worry for the country and what's happening to the economy and the poor federal workers," Virts-Mozer says.
Tell Cousin Phil to put away his checkbook. By opening up solicitation, the government also limited who can fund your business for equity in certain cases.
Natalie Gordon was two years into bootstrapping her online baby-gear registry start-up, BabyList, when she was accepted into the 500 Startups accelerator. 500 Startups encouraged her to raise funding to speed up growth, and she did so with considerable success: She put together a first funding round amounting to $120,000.
That allowed her to hire three employees and rent office space in San Francisco, and, she says, gave her the credibility that led rapidly to another half-million dollars in investment. "Thanks to that money, I've been able to grow the company a lot since then,” Gordon says.
It's a classic story, including this element: of that $120,00, more than half ($70,000) came from family members and assorted friends. Today, Gordon couldn't do that. It is no longer legal for a start-up to take money from both friends-and-family investors, as they are called, and professionals. It's one or the other. That's because of a little-noted side effect of a provision of 2012's Jumpstart Our Business Startups Act, or JOBS Act, which went into effect last week.
You've probably heard about the new ability of start-ups to do equity-based crowdfunding, based on last week's lifting of the 80-year-old ban on general solicitation. It's that same provision that blocks friends and family who are not "accredited" investors (any individual with, basically, an annual income of more than $200,000 or non-home net worth of more than $1 million) from such funding rounds. The JOBS Act, which on its surface is a sweeping attempt to simplify the funding process for start-ups, is actually limiting funding options for the scrappiest companies in the United States.
Once you start talking openly about your fundraising, you relinquish the right to include your very interested but not very wealthy Uncle Pennybags in your funding round. "The letter of the law is that if you are generally soliciting your round, you have to go to accredited investors only," says Chance Barnett, a serial entrepreneur, start-up adviser, and CEO of Crowfunder.com, a platform for equity-based investment.
And if you're determined to involve Uncle Pennybags? You relinquish the right to involve accredited investors.
That's not all. Let's say your friends and family assure you that they do qualify as accredited investors. According to the Securities and Exchange Commission, you--the issuer--must also take "reasonable steps to verify that such purchasers are accredited investors." Meaning: You may need to prove your kin or pals chipping in for funding are actually as financially fit as they claim. And that might just be a position you don't want to put yourself in, notes William Carleton, a Seattle-based startup lawyer who has written extensively about the new rules on his popular legal blog.
"What I've been telling clients is that there is no friends-and-family exemption," Carleton says. "There's no easy way to raise money from grandma, even if she is an accredited investor, because you have to be willing to take reasonable steps to verify that."
I know what you're thinking: Surely there's a way to take a small amount of money from dear old granny without looking deeply into her finances.
"You can do a deal that is not general solicitation--but good luck figuring out the definition of 'general solicitation' alone," said Peggy Wallage, managing director of Golden Seeds, a firm that's invested $60 million in companies, at the WomanCon conference in New York City in late September, where she was speaking about funding options before an audience of female entrepreneurs. "It's not simple. You need to talk to lawyers."
Before you even seek legal help, tread lightly: If your friends or family--anyone with whom you are in regular and close contact with--want to chip in for a small round of funding, the new laws require you to stay tight-lipped about it to everyone else. That includes private communication online, or alluding to the fundraising, say, on Facebook, because that could be construed as "general solicitation."
"It's still somewhat gray, but if you are communicating with anyone who you don't have a significant existing relationship with, you can't mention it," Barnett says. "People should just be careful to not use any Twitter, Facebook, or email to discuss the deal."
San Francisco-based start-up lawyer Andre Gharakhanian, a partner at Silicon Legal, says he doesn't expect friends-and-family rounds to disappear. They will, however, come much earlier in a company's existence, with a general-solicitation round following. The classic story, is appears, is going to have to change.
The iconic family business has released a new line of bats designed to reduce breakage--and improve safety for players and fans.
The crack of a wooden bat is a quintessential part of baseball. But shattered bats also pose a danger to players and fans. This spring, in an effort to cut down on bat breakage, Hillerich & Bradsby, the maker of Louisville Slugger bats, introduced its hardest line of bats yet.
MLB Prime bats are hand cut from maple or ash so the grain runs lengthwise in straight, consistent lines. Next, they are vacuum dried, compressed, and covered with three layers of water-based topcoat seal in the company's Louisville factory. "A bat breaking will always be part of the game," says Bobby Hillerich, director of wood bat manufacturing for Louisville Slugger. "But these changes will help keep the players and fans safer."
His company customizes the bats, which retail for $120, for hundreds of major league players, including Tampa Bay Rays third baseman Evan Longoria (shown here swinging a large-barrel I13 model made of northern white ash).
J. Frederich Hillerich, Bobby's great-great-grandfather, started making bedposts and other lumber products in 1859. Today, Hillerich & Bradsby has 300 employees and makes 1.8 million bats a year. It sells bats, gloves, and other baseball accessories worldwide.
If you know him as the tough guy from Shark Tank, you might be surprised to see his soft side.
On ABC's Shark Tank, Fubu founder and branding expert Daymond John is a no-nonsense kind of guy. Here, he shows us a softer side.
What's one thing your employees would be surprised to know about you?
I actually like them.
What's your theme song?
"Going the Distance," by Bill Conti. From Rocky.
Which TV or movie character would you like to go into business with?
The Grinch. He's straight to the point. He's a little crazy, and he clearly doesn't let emotions get in the way.
Who gives you the best advice?
[Marketing expert] Jay Abraham. He always challenges me, and he makes me feel dumb, which is impressive.
Whom would you trade places with for a day?
President Obama. Why not be the most powerful man on the planet? Plus, he's just cool.
It's 8 p.m., and you're traveling alone on business. What do you do all night?
Catch up on emails, start answering the emails coming in from China, and read my goals.
The biggest myth in business is…
You need to be mean and cutthroat to get ahead.
What company do you not want to start but wish someone else would?
A puppy cuddle company. Take puppies around to different places, a bunch of puppies, and allow people to have the puppies jump all over them and cuddle with them. Like puppy therapy.
What have you sacrificed for success?
What have you learned about yourself while running your business?
I don't take failing easily. That, and all the responsibility falls on me. The buck stops here.