Exit strategies

Fire_exitIn nearly all the business plans I review for Tevel (the non-profit angel club I volunteer at), the last section outlines the company’s “exit strategy”. I was wondering if that’s some sort of requirement in writing business plans for investors? I don’t remember ever writing anything like this in any of my biz plans.

As I wrote a while back, I think it’s alarming when a company that has not even been funded yet is talking (or even thinking!) about exit strategies. In my book, a startup can only have a single strategy and that’s about how to grow it’s business. If “exit” is your strategy, it is almost guaranteed that you’re building for something small that will be easily swallowed (or worse – crushed) by the acquirers you’re aiming for. That’s a terrible strategy (unless your plan is to get hired to a company via an acquisition), and not one I ever want to invest in.

I’ve learned that exits have 2 inherit properties:

  1. They hardly ever present themselves the way or at the time you’d expect in advance.
  2. Real exit opportunities emerge only when you’re focusing on building a great business, not on exiting.

So my advice to entrepreneurs – drop the silly nonsense ‘exit strategy’ section from your biz plan, and focus on the ‘company strategy’ instead…

{image CC by tracer.ca. Thanks!}

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Featuritis

From Wikipedia:

Featuritis is a term used to describe software which over-emphasizes new features to the detriment of other design goals, such as simplicity, compactness, stability, or bug reduction.


Featuritis is often accompanied by the mistaken belief that “one small feature” will add zero incremental cost to a project, where cost can be money, time, effort, or energy.

I recently met an entrepreneur who has been developing a web-based service for over a year, and was having trouble getting traction for it. He asked for my advice on how to improve his product so that users start flocking to it.

Two minutes into the demo, it was crystal clear what his trouble was – it was a classic case of Acute Featuritis. He was proudly showing off how his product did this, that, and the other 12 things, way more than any of his competitors ever dreamed of doing. He was shocked speechless when I told him I thought that the best cure for his product is to kill 99% of it and focus obsessively on that single aspect or feature that makes his product unique. That is the last thing in the world he expected to hear from me, and he seemed to be very disappointed with our meeting.

These are the common misconceptions about features, as they relate specifically to startups:

  • “More features will impress prospective clients” – wrong! More features will create many more opportunities to disappoint and confuse clients.
  • “My product has more features than my competition” – uh-oh! You are handing your competitors the biggest gift they could ever ask for – the ability to specialize more than you and do one thing really really great.
  • “By having more features, I’m appealing to more potential users” – wrong again! By having more features, your product becomes less appealing to your best potential users, and probably not appealing enough to all the others you happen to address along the way.

The urge to add more features and appeal to a bigger audience always exists. But as an entrepreneur that’s an urge that has to be fought daily. The best question to ask is: “What features can I afford to kill today?”

I find that the best way to think about it is this: If our users love the few things we do now, we can always add more features later; And if our tiny niche audience loves what we do now, we can always try to appeal to a broader audience later. Think about the alternative to this approach: “if lots of people don’t really get all the stuff we’re trying to do now, can we improve our focus later?….”.

I think you know my answer…

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What business are you in?

I recently watched Michael Eisner’s show on CNBC (called ‘Conversations’, I think) in which he hosted Mark Cuban.

Mark had one of the best entrepreneurial sentences I’ve ever heard:

When I bought the Mavericks, everyone in the organization thought we were in the business of basketball. But we aren’t. We’re in the business of “Honey, what do you want to do tonight?”

Bingo!!

Photo credit: JD Lasica (link below)

It’s so easy to describe what business *you* think you’re in. The trick is to define the business *your customers* see you in. It’s not about what your product does, or which cool features it has. It’s all about understanding which piece of attention of your customers you’re fighting for, and who are the others trying to get that same slice of attention.

This has got to be the #1 mistake entrepreneurs make (and I’m speaking from personal experience…) – falling in love with their product/features and believing that the product is the business they’re in. This must be the silent killer of startups because it’s such a huge mistake that’s so easy to go unnoticeable…

Cuban, as usual, nails it.

{Image CC – JD Lasica. Thanks!}

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