Project: Liftoff

Some days, being an entrepreneur means that you end up with a banana in your shoe. (If you’re wondering why my cup says Matt, not Wade, it’s because Wade is only pronounceable to people of northwestern european heritage, but the rest of the world can handle Matt.)

The big news for business this week is obviously healthcare reform. What it means obviously differs between various businesses; but, for the true start-up, the bill is clearly a very good thing. Healthcare reform will help startups in two specific ways: 1. Cash Flow 2. Enabling the start Cash Flow Startups are unique beasts – their problems virtually always come down to two factors, cash flow and time. While those two are substitutable for most businesses, they aren’t at startups. Anything a startup can do to minimize costs and take them out of the company is a good thing Healthcare reform will help startups improve cash flow by ensuring that the individual insurance market is affordable, or at least predictable, enough for founders to carry insurance on their own dime, rather than buying a corporate plan from day one. Enabling the Start As much as this blog will always be about “cash is king,” the freedom to start a business is by far the most important thing healthcare reform will bring to startups. Right now, that first step out of a “real job” is a doozy – losing your healthcare is a big part of that. These days, I see a lot of laid-off clients who have COBRA coverage, but, in other economic times, we want to enable individuals to choose when to start a company. Ensuring access to insurance could potentially allow many people who are worried about starting a business to get out there and do it. Economists have found a lot of evidence that labor market mobility is important to a healthy economy. Startups create jobs, and help American industry to evolve and respond to market changes. We need to make it as easy as is reasonable for people to move from a less-than-ideal job to starting their dream company. Healthcare reform does that. In the end, that’s good for all of us.

We just got new business cards… so many new cards. And that made me think.

There are few TV shows that actually pass out good business lessons today – by my estimation, only Fox’s Kitchen Nightmares and Bravo’s Tabatha’s Salon Takeover really teach useful, practical, everyday things. (I’m holding my breath on Undercover Boss.) Last week’s Kitchen Nightmares was a great example of how much business information is hidden in this show. If you’re running a small company, you could use to watch and learn. If you haven’t seen Kitchen Nightmares, celeb chef Gordon Ramsay stops by a new, failing restaurant each episode. There’s a first act, in which Gordon discovers how bad things are and why they’re broken; a second act, in which he tries to get the owners’ and staff’s buy-in to his changes; and a third act, in which they re-launch the restaurant with a new menu, new décor, and new attitude. Presumably, the big changes lead to success. Last week, Gordon visited a local restaurant, Lido de Manhattan, in pretty, sunny Manhattan Beach. The restaurant’s revenue is off and customers are not returning. Ramsay comes in and uncovers a litany of problems. The one that stood out from a business point of view was an early revelation: the décor and menus hadn’t been updated in more than five years. This is more than an operational problem: it’s a problem of not being in touch with customer needs. That’s something I see with a lot of clients that have had their revenues stall: they’re competing on what they think is important, not on what their customer thinks is important. In this case, customer tastes in atmosphere, ingredients, flavor profiles, and portion sizes have all changed over the last five years. Ramsay responded by identifying a particular need within Lido’s customer base: a trendy wine bar, which, surprisingly enough, isn’t available in the area. Ramsay made over the menu to better fit this market and changed the restaurant’s look to complement as well. This is exactly the right approach. I actually ate lunch at Lido di Manhattan about two weeks after Ramsay came by, and had a great meal at a place that looked trendy and seemed to run like clockwork. If you’re looking to do the same thing for your company, you just need to reconnect with your customer. What are the trends in the industry – not from your point of view, but from theirs? How are they responding to them? How are your competitors responding to them, and how does this affect your customers? What gaps does this leave? Look particularly at what your customer can afford to spend and how they prefer to spend it. This is just one of the business lessons I’ve seen in Kitchen Nightmares. I wouldn’t be surprised if I write about them here soon.

You’ve probably heard about the exit strategy. Sure, a few years ago, only professional investors asked about them; these days, everybody’s pitching the exit strategy. The good news is that most of my clients come to me and ask about their exit strategy. The bad news is that my clients don’t need an exit strategy: what they, and all entrepreneurs, need is a life strategy. The problem is that having an exit strategy, per se, doesn’t directly help anyone. Well, it may help your investors, if you have investors, and if you picked an exit strategy specifically for them. But other than that, an exit strategy is only a means to an end. The end is: getting what you want. That’s the beauty of being an entrepreneur, really – you are finally the one in charge of picking how everything gets to end up for you. Take advantage of that mighty power. My friend Freddy reminded me of a great blog entry he wrote last year: “Why Exit Strategies are Bad for Business.” His basic message is that you need to be committed to your start-up, not leave it. Well, that’s true for some people, and not true for others. Don’t build your company around your exit strategy: build your company and your exit around your life strategy. Let’s take an example: do you want a guaranteed job for the rest of your life? Then you need what the pros call  a “walking harvest” – a plan that has you drawing a salary and perhaps dividends from a company that operates for years – rather than focusing on getting a single chunk of money. Do your investors want something different? Don’t change your whole plan to make them happy, realize that your exit strategy differs from theirs. If you can’t put yourself in a position to stay while they get their exit, then you need to accept that you need a premium on your exit to make ending up with no job worthwhile. Want to get out in a few years to spend more time with your family? Plan now to put yourself in a position to either sell your company or have it run without you – both are equally acceptable exits from the point of view of your life strategy. How do you develop your life strategy? Well, that’s the big challenge, but it’s worth confronting that from the launch of your business. After all, you shouldn’t just have the exit you want; you should have the work you want, too, every day. So take a step back and take the time to articulate your preferences, beliefs, and goals, because you may need to think bigger, strategy-wise: you may need to think about your whole life.