Tuesday, December 30, 2014

Why Was 49ers Head Coach Harbaugh Like a Startup CEO?

Rocky Richard Arnold

      The head coach of the 49ers left the organization on December 29, 2014 after a year of fractious rumors and innuendo involving the team owner and president/CEO, Jed York; the GM, Trent Baalke; and Head Coach Harbaugh that many think affected the performance of the on-field players.

      Coach Harbaugh came to the 49ers with a strong background of leadership in both college as a head coach (University of San Diego and Stanford University) and the NFL as a starting quarterback (Chicago Bears, San Diego Chargers, and Indianapolis Colts).  Many fans viewed him as being a coach that had a style well-suited to the younger players found in college, and they wondered if he would fit in the NFL where more mature players have to be led and managed.

      49ers Coach Harbaugh took a collection of players and made them into a team that performed at a very high level.  And he did that in the first year and the following two years—three years of high achievement—followed by a sub-par fourth-year 8-8 record in 2014.  That the players played for the coach and vice versa was well understood by the fans—loyalty extended both directions.  Harbaugh was appreciated for his over-exuberant behavior and energy-laden motivating tactics designed to elevate the adrenaline and performance of the players.

      NFL teams are just like any other business.  They have head coaches that are hired by the owner-investors.  Both owners and coaches are responsible for performance.  However, in the absence of success (i.e., winning the Super Bowl), owners have the upper hand and the greater responsibility for achieving organizational success.  Shortcomings are almost always totally ascribed to the head coach without considering the responsibility of the team owner—fair or not, that is the way it is.  Given the excellent competencies of Coach Harbaugh, however, most fans will turn to Jed York and hold him responsible for the performance of the team next year and afterward based principally on his choice for the next head coach.  And that is the way it should be.  Owners are responsible for hiring the top manager (head coach or CEO).

      An NFL team owner (in this case, the York family) and investors are both intensely focused on success.  An NFL team owner wants to win the Super Bowl and realize the emotional highs and pride that comes from winning as well as increase the value of the franchise.  Investors in a company seek to increase the value of the investee company and ultimately exit with the highest ROI possible.  Both NFL team owners and investors in businesses are challenged with the need to secure a talented leader (Head Coach in the case of an NFL team and CEO for business organizations).

      Startups are typically led by the original vision holder, inventor, or founder whose skills in a leadership role are uncertain.  In the world of startups, the replacement of a startup founder/CEO is not unusual, especially when initial successes are replaced with shortcomings in sales, revenue, and profitability.  Investors assume that the shortcomings are the result of CEO failures in leadership and/or mismanagement and decision-making.  Or in some cases, investors assume that a less-experienced founder/CEO lacks the requisite knowledge, skills, and experience to take the organization to a higher level of performance.  Investors, like NFL team owners, are wise to carefully dissect the reasons for shortcomings.  Investors quickly think that a new so-called professional CEO is needed—a person who will come in and build on the initial work of the startup CEO by installing and monitoring processes and setting the strategies that will lead to success.

      It must be remembered that players may be strongly bonded to each other as a result of the intense external pressure to win.  Removal of a well-liked founder/CEO or the head coach raises the risk that the founding team or players are disaffected both by the action of removal as well as the unsuitability of a newly-hired head coach or professional CEO.  This is the risk for the 49ers owner, Jed York.

      Here are some differences between a startup CEO and a professional CEO that must be considered before replacing a startup CEO (or a winning NFL head coach):

    A startup CEO is focused on winning key initial sales and on revenue growth.  A professional CEO is focused on developing reliable processes for generating revenue and profit.
●    A startup CEO is heavily involved with the selection of people.  A professional CEO is driven to develop policies and processes that guide the hiring process.
    A startup CEO interacts directly with personnel.  A professional CEO interacts primarily with the next level of management.
    A startup CEO has a naturally high affiliation with team members where loyalties are strong.  A professional CEO has a high affiliation with investors and senior managers and loyalties between employees and management is lower by comparison.

      In important ways, Coach Harbaugh was like a startup CEO.  He moved the organization from mediocrity to success in a single year based on his leadership style.  His affiliation and loyalty was with the players and not with ownership.  He had a strong focus on immediate success, which the 49ers needed.

      Was he the coach for the long term?  Perhaps not, according to the owner, but on the other hand, his style was perfect for an NFL whose players were young and in need of coaches who understood the pressures of both maturing and performing at the same time.

Rocky Richard Arnold provides strategic corporate and capital acquisition advice to early-stage companies founded by entrepreneurs wishing to successfully commercialize high-value-creation opportunities, ideas, and/or technologies.  More information about Rocky can be found at www.rockyrichardarnold.com.  His book is available for purchase on  Amazon at http://tinyurl.com/pv248qq.  Financial software for use by startups can be purchased on Amazon at http://www.amazon.com/gp/product/B00K2KPSI2.  He posts articles about entrepreneurship on his blog at http://thesmartentrepreneur.blogspot.com.

Tuesday, November 11, 2014

Can You Be An Entrepreneur?

Many hard-working and imaginative people often wonder if they have what it takes to be an entrepreneur. 
You will need these three qualities at a minimum:  passion, vision, and perseverance.
Passion drives your enthusiasm and creativity.  You will need to find a good idea, invent something, or discover something useful to society.  Whatever it is, it must energize you and propel you into action.
Next, vision.  Vision is the ability to see the future result of bringing your idea to fruition (presumably an important product, software app, societal benefit, etc.) that can be the basis for a profitable business.
Finally, perseverance.  You need perseverance to overcome all obstacles and endure all setbacks.  In brief, you must be resilient and resolute.
If you have at least these three qualities, you can be an entrepreneur.
More information on being an entrepreneur and how to accomplish a funded startup can be found in my new book now on Amazon, The Smart Entrepreneur: The book investors don’t want you to read.  Click here to order on Amazon or use http://tinyurl.com/pv248qq 


Tuesday, September 16, 2014

How to Overcome the Hesitancy to Write Your Business Plan.

I’ve written many business plans not only for myself but for others. No matter how much experience you have there is always a tendency to shy away from the task at hand. Writing a proper business plan is a big challenge for each and every entrepreneur.

Too often the reluctance to start writing the business plan is purely mental – the natural reluctance of the mind to engage with a very challenging task. Every entrepreneur learns to overcome this in time. But, here is how I do it and the task is less overwhelming if the following is observed:
  1. Don’t feel rushed. Take time to thoroughly do the underlying research and be patient with yourself. A good business plan will take 2-4 months to complete. Don’t start until substantially all the required data is available.
  2. Brainstorm your thoughts. Start writing down your thoughts, questions, issues, and information points on a piece of paper with no particular organization in mind. Let your mind roam, but write down your thoughts. Don’t lose your priceless mental thinking. Start this on day one.
  3. Build the Table of Contents. The TOC helps to further organize your thoughts. You can use a standard business plan template or make one up to suit your needs. Organize and title the chapters of the TOC so that just reading the TOC reveals how your business will succeed. More on this in my book.
  4. Add bullet points. Start filling in bullet points within each section (this is not writing, per se). You can use the brainstorming notes to help you determine which information goes where.
  5. Organize the bullet points. Place the bullet points in logical order from a reader’s point of view. Which information needs to be presented first, next, etc. What is the important concluding sentence of each paragraph and remember only one major thought (or point) per paragraph.
  6. Identify critical charts, pictures, graphs, etc. These non-text items add interest and variety to your business plan but most importantly they convey important facts and conclusions in a form that many readers can absorb quickly. Prepare corresponding text or identify how you will use that information.
  7. Writing responsive paragraphs. Now, it is finally time to start writing text for each section but don’t try and perfect that text yet. Just do the first cut which involves more organization within each sentence and paragraph to deliver the proper message. Consult a thesaurus and dictionary to use the words that portray in the mind of the reader the precise thoughts and messages you want to convey.
  8. Connect paragraphs. Once the paragraph thoughts are organized, look for how each paragraph-thought relates to the others and fill in those links between paragraphs that the reader needs to know to complete their mental images they are developing.
  9. Finish (polish) each paragraph and section or parts of sections. If you get bored with a particular section then move to another. Don’t get bogged down. If the writing seems difficult move to another section, but keep writing. Don’t be afraid to take a mental break of a day or so. Relax, you are almost there.
  10. Continue with the writing/polishing. At some point you will have written the first draft of the business plan.
  11. Update. Constantly work on the business plan as new information and thoughts develop.
By breaking the process down into small, incremental steps and being patient, the business plan will eventually come together and at some point the progress you have made will incentivize you to continue working. Strive for accuracy and quality of work.

Remember, credibility = specificity so make sure you have the data and facts available so you can write with authority.

See my author web site at www.rockyrichardarnold.com.

All questions and contributions are welcome.

Saturday, September 6, 2014

Enhancing Start-Up Valuations: Target Markets and Pre-Revenue Sales Projections.

In an earlier blog, I suggested that an inventor/entrepreneur must ask and answer five questions before deciding to start a new business.
Here is Question #2: Is there a significant market for products to be made or services to be provided?
My comments and answer.  
One of the more difficult issues for entrepreneurs to address relates to target markets and potential sales revenue.
It is critical at the earliest stage of planning and due diligence by founders to determine those markets (e.g., the target markets) that are sufficiently large and growing that they would support the entry of a new competitor (the entrepreneur’s new venture). Professional investors generally insist that target markets be large and growing so that missteps and errors on the part of the new venture can somewhat be compensated by the size of the market which presumably contains large competitors who are not particularly concerned with competing with a small, up-start, technology company. Nevertheless, venture capital firms, in particular, are interested in supporting companies that target billion dollar markets rather than those that target million dollar markets. Both the magnitude of investment considered and the interest of professional investors scale with the size of the markets to be served by the underlying technology.
The goal for an entrepreneur is to identify a number of potential target markets that collectively (in a summed sense) have a large size, presumably in the billions of dollars range. One of these target markets will eventually be selected as the entry market — that market that offers the best prospect for producing profit soon after funding. That initial target market need not be large, but it must be one for which success is highly probable.
The weakest part of any business plan will be the projection of sales revenue. Investors, for good reasons, dissect sales numbers and also carefully study the rationale behind the projections. The inability of the entrepreneur to adequately explain or validate how sales will be accomplished gives investors the opportunity to discount proposed valuations. The entrepreneur is usually ill-prepared to defend the business plan in the absence of a good, if not excellent, marketing and sales strategy and plan.
For a new venture without any evidence of sales, sales revenue needs to be projected using a combination of provable data about the markets and assumptions and judgments about how prospects are converted into customers. These assumptions and judgments will still be examined closely by investors but they are more defensible and subject to testing (surveys, focus group, for instance) at early stages by the new venture. With early testing, sales projections become more credible and less subject to discounting by investors. This provides a pathway for entrepreneurs to argue for greater pre-money valuations. 
More detailed information about developing robust pre-revenue sales projections are discussed in my book, The Smart Entrepreneur: The book investors don’t want you to read available on Amazon in September 2014. 
Question #2 must be answered YES to continue moving forward.
See my author web site at www.rockyrichardarnold.com.
All questions and contributions are welcome.

Thursday, August 14, 2014

The Five Questions to Ask Before Starting Your Business

What are the five most important questions an inventor/entrepreneur must ask and answer before deciding to start a new business? Here are my five:
  1. Does any other person or entity own this idea, invention, or innovation?
  2. Is there a significant market for products to be made or services to be provided?
  3. Is there a business model that makes sense; that it, can the business be profitable?
  4. How much money (investment) will I need?
  5. Can I write a persuasive business plan?
In my following blogs I will address each question. Please feel free to comment.

I am republishing this starting blog because of technical issues.

Friday, August 8, 2014

Before Starting a Business, Answer This Question First: Who Owns the Invention?

In my earlier blog, I suggested that an inventor/entrepreneur must ask and answer five questions before deciding to start a new business.
Here is Question #1: Does any other person or entity own this idea, invention, or innovation?

My comments and answer.  An idea by itself is not legally protectable unless kept as a trade secret (and not made public somewhere else) and even then another person or entity may come up with the same idea thus negating its value as a trade secret. An idea should drive further thought and, ideally, the creation of an innovation, a way of solving a new or existing problem differently and in a better way.  The innovation should manifest itself, for instance, as a product that offers improved benefits or profitability. The innovation may also be a new or improved service or manufacturing process. The innovation must involve the development of technology that is new and unique.  Innovations are best secured in the form of a patent though some may be better preserved as a trade secret. For something to be patentable it must satisfy a number of requirements (the subject of another blog), but the patent basically describes an invention.  Patents are property and assets and offer important legal rights and protections for its owner.

So, the answer to Question #1 must be NO, of course, but the most important part of the question deals with the question of whether the invention is owned (and patented) by another party. The inventor/entrepreneur must be absolutely certain that any technology to be developed based on the idea, invention, or innovation is unique and provides the underpinning needed for securing legal protections (e.g., patents, software that may be kept as a trade secret, or perhaps copyrighted).  This means the entrepreneur and patent attorney must perform a good amount of due diligence on technology and patents before having certainty that the answer must be NO in order to proceed.

Looking forward, if an entrepreneur anticipates taking-in professional money, then it should be expected that investors will diligently research competitive technology positions especially the patent landscape. For investment, the technology and legal positions (both current and anticipated) must be robust – reducing technology risk to near-zero is a prerequisite for investment.
All questions and contributions are welcome.

Saturday, July 26, 2014

Just listed on ebay: Integrated Financial Statements (CD) consisting of 16 integrated spreadsheets designed for use by start-up entrepreneurs. Companion book "The Smart Entrepreneur: The book investors don't want you to read" coming to Amazon in September 2014.

Friday, July 25, 2014

The Five Questions to Ask Before Starting Your Business

What are the five most important questions an inventor/entrepreneur must ask and answer before deciding to start a new business? Here are my five:

1.       Does any other person or entity own this idea, invention, or innovation?

2.       Is there a significant market for products to be made or services to be provided?

3.       Is there a business model that makes sense; that is, can the business be profitable?

4.       How much money (e.g., investment) will I need?

5.       Can I write a persuasive business plan?

In my following blogs I will address each question. Please feel free to comment.

Friday, June 20, 2014

Welcome to my Blog

Welcome to my blog – a blog that is intended to be a good spot for entrepreneurs to present and respond to issues involving entrepreneurship. Along the way, I will present useful information as well as ask stimulating questions to seed discussions centered on a range of issues. The blog is focused on providing serious and responsive answers and solutions from me as well as the other experienced entrepreneurs and business people of the world who may choose to contribute.

This is my first blog and while I haven’t decided on an exact style yet, that may be just fine as in the final analysis my goal is to facilitate discussion, provide my own two-cents (which occasionally may be worth a nickel), and  assist entrepreneurs as they navigate through the turbulent waters of “entrepreneurship." However, the collective interests of the participants in this blog will be my ultimate guide.

The goals of the blog are the same as for my book to be published on Amazon.com in September 2014; that is help an entrepreneur:
(1)    Achieve his/her vision.
(2)    Maximize her/his enterprise’s value and return on investment.
(3)    Achieve results efficiently and preserve the equity of founders.
(4)    Avoid catastrophic pitfalls.
(5)    Minimize stress and uncertainty inherent in the entrepreneurial processes.

I will be working on blog content over the next few weeks, but until I publish more, please feel free to ask questions.
My author web site, www.rockyrichardarnold.com,  will be up by mid-July, perhaps sooner.
You can also find out more about me on LinkedIn: www.linkedIn.com/in/rockyarnold/ and Twitter @Rocky_R_Arnold.