All posts by Matt Hottle

12 Oct 2015
Sticky Post By Posted in Entrepreneurship, Start-ups With No Comments Permalink

How Start-ups Sabotage their Success

Sticky Post By On October 12, 2015 With No Comments

I recently met with a couple of guys starting a new business and they flattered me by asking what advice I would offer them as they start their new venture. They both came from technical backgrounds and are very smart but have almost no business experience. The question was in two parts.

  • What self-inflicted issues do I see in start-ups?
  • What should founders, with limited business experience, do to help flatten that learning curve?

Needless to say, those questions are both savvy and very complex. I cautioned them that they should gather several viewpoints. We had an excellent conversation and, as readers of my ramblings on LinkedIn, they suggested I share it as a brief checklist. If you don’t like it, it’s their fault.

Self-Inflicted Issues

Here are some common head-scratchers I keep running into:

  1. Attempting to generate revenue exclusively through social media
  2. No actual salespeople or sales process
  3. Making crucial business decisions based on securing another round of funding
  4. No strategy to generate scale/growth
  5. Profitability considerations completely absent from strategic discussions
  6. Image being prioritized over substance
  7. B2C marketing in an obvious B2B model
  8. No company-wide goals
  9. No strategic planning horizons longer than 90 days
  10. Poor or absent talent management practices

Flattening the Learning Curve

Things to consider

  1. Be open to outside input. No one is calling your baby ugly and if you constantly resist feedback and criticism, you may never realize your full potential.
  2. Be flexible. You will make mistakes and learn from them but the more basic and flexible your strategy, the better. The ideas you started with will probably be blown up within 30 days so prepare to pivot.
  3. If you take funding money, make sure you place a premium on arrangements where the investors provide a structure to actively support, advise and promote your start-up. The money is great but agreements that go beyond financial help are the ones with the highest value.
  4. Explore incubators or accelerators with successful “graduates.” If you watch the HBO show “Silicon Valley,” they satirically illustrate that starting an incubator is not a very high hurdle to clear. Graduates are what you are looking for—not ping pong tables and craft beer Thursdays.
  5. Dilution of equity is not the end of the world. A fully diluted ownership stake of 51% on a $10 million company is far better than 100% of a $100k company. If there are more slices of pie being cut but the pie is now 100 times larger because of the partnerships and growth that dilution created, you are winning.
  6. Except for highly technical positions, hire based on attributes—not experience. What attributes will make someone successful in the role for which you are hiring? Fit between the candidate and the position on that level is a far better predictor of success than a resume with the right titles on it.

This is not a complete list and opinions will vary but in the limited scope of this conversation, I do think these hold higher value than the dozen other considerations I would suggest for pre-funded companies.

It was apparent to me that I would not be the last person from whom they sought feedback. I highly doubt I was the first.

21 Sep 2015
Sticky Post By Posted in HR & Recruiting With No Comments Permalink

“It’s not me, it’s you…” How not to be the world’s worst boss

Sticky Post By On September 21, 2015 With No Comments

George Constanza claimed to have invented the “It’s not you, it’s me” breakup line. He then goes on to elaborate, “Nobody tells me it’s them, not me. If it’s anybody, it’s me.” People are guilty of using this cliché to let someone down easily but we know the opposite can be the more truthful statement. It’s not me, it’s you.

I was recently cleaning out some files from a previous job and I came across a piece of paper that hung in my office as an affirmation of how I was trying to lead my team. This isn’t a Steve Jobs motivational quote or a picture of a cat encouraging me to “Hang in there.” This was actually something I lifted from an article listing the five things a bad boss does. Preferring to be more proactive, I re-wrote it in the affirmative to read as all the things a good leader does and hung it on the wall directly in front of my desk and in plain sight for anyone to see.

I had a horrible boss at the time. He regularly committed most of the “don’t do” items on the original edition of the list and, over time, his poor leadership drove me to start questioning my own abilities. It drives me nuts I can’t remember where I found this because it was a massive help to me when I needed it most. I realized it wasn’t me; it was him that had failed. Sometimes it really is someone else who has screwed up and you can accept that’s on them.

It’s not me, it is you.

Below is the list and if you are a leader of people, ask yourself if you are doing these things. If you aren’t why?

  1. Don’t question everything. Trust your peoples’ knowledge or experience or unique expertise. Don’t bulldoze in on every decision and make snap judgements based on what limited information you’ve been able to glean from a status report or something you overheard while refilling your coffee.
  2. Don’t abandon ship. Have an employee’s back. Never call an individual out and shame him or her when some element of a project goes sideways.
  3. Don’t play favorites. Acknowledge each employee’s strengths and weaknesses and use this understanding to build powerfully effective teams. Don’t choose one “pet” employee who does one thing well and hold them up as the standard by which all performance must be measured.
  4. Lead with requests, not demands. Give people time to complete the task and don’t ask for things in a shorter time frame just to sit on the decision or action for weeks. Ask for their participation and input- resist dictating it. Show them the “WIIFM.” (What’s In It For Me)
  5. Never intimidate, obfuscate or manipulate. Remember that the atmosphere you create for your team starts with you. Be consistent in how you respond to issues. Don’t alternate between bouts of compassion and irrational flares of rage. Be transparent as much as possible with information.

So what did I miss? Leave a comment below to add to the list or challenge one I have listed.

17 Sep 2015
Sticky Post By Posted in Business Headlines, Entrepreneurship, Strategy With No Comments Permalink

Ever Been Punched in the Face?

Sticky Post By On September 17, 2015 With No Comments

I have only been in one real fight in my life and if YouTube had been around, I’m sure my scuffle would have received a critique similar to the famous Star Wars Kid video. I don’t remember much about my fight because everything kind of went blurry in the moment. I can only imagine there were a lot of flailing arms in an unflattering display of failed pugilism.

One thing I will always remember is getting punched square in the face. There is something so incredibly jarring and absolute about getting hit in the head. It was something I decided, in that split second, wasn’t for me.

Mike Tyson famously said, “Everyone has a plan until they get punched in the mouth.” Recently, that quote started to seem increasingly relevant to Redhawk and the work we were doing with clients.

Our firm works primarily with entrepreneurs and owner-operated companies. More specifically, we work with companies that are in some kind of transitional phase. This is represented both in periods of growth and recession. The realization of this transition happens when the current business structure or model can no longer operate as it has and continue to grow successfully.

Sometimes this happens slowly over time and creeps up on our clients. In some cases, this point of inflection is immediate, explosive and violent. A key supplier folds, an important employee quits or a major customer leaves and the business has been fundamentally changed overnight.

They got (figuratively) punched in the mouth.

This is where one of three things happen and is best captured in a quote my friend Ted Alling posted to LinkedIn recently:

“Bad companies are destroyed by crisis. Good companies survive them. Great companies are improved by them.” —Andy Grove, former CEO of Intel

Company leadership that is focused on surviving immediately concentrates their efforts on damage control and minimizing the impact as much as possible.

  • They offer significant discounts to win major customers back.
  • They publicly fire a key employee to signal the problem has been corrected.
  • They re-brand themselves in an attempt to create distance between their image and their failure.

In the aftermath of this business “assault,” we see if an organization will rise to the challenge and merely survive or come out of the crisis prepared to THRIVE. Great companies are not only ready for this kind of challenge but relish the opportunity it presents to push forward and get even better.

How well can you take a punch? Here is an abbreviated list of questions to consider:

  1. How many customers do you have?
  2. What is the average revenue per customer? Any customers who represent more than 20% of your annual revenue? What happens if they go away?
  3. What redundancy do you have in your supply chain? Are you tied to a single source for any major production requirements?
  4. Do you have a succession plan for key employees? What happens if they win the lottery and never come back to work? Are you prepared to deal with that?
  5. Do you have clear organizational goals? Does everyone know what they are? Is progress toward those goals regularly shared with everyone?
  6. Do have your business rules and operating procedures documented? Are they kept up to date and relevant?
  7. What is your Current Ratio? Can you survive a downturn in your revenue?

This is a very basic list but if you find you are missing any of these, take the steps now to correct them.

Good companies are prepared to take a punch. The best companies are ready to make the puncher miss.

12 Sep 2015
Sticky Post By Posted in Redhawk, Start-ups With No Comments Permalink

Birmingham is the Marv Levy of Entrepreneurism

Sticky Post By On September 12, 2015 With No Comments

This October marks 6 years since our family moved from Atlanta, GA to Birmingham, AL. In that time, our kids have grown a few feet, I started my first two businesses and gained several more gray hairs in the process. Moving from a growing Atlanta metro to the decidedly smaller Birmingham was a big transition.

The first two questions we were asked when we moved in were if we had found a church to join and what football team we supported. In case you are totally unaware of the college football culture in Alabama, there are only two teams in the world- University of Alabama and Auburn University. I have much love for all my Samford, UAB and Troy friends but most of them incorporated either the “Roll Tide” or “War Eagle” vocal reflex during childhood.

Those questions were an early indication that our new life in Birmingham may be a bit simpler, exceedingly sincere and endearing.

Atlanta was a transient city and it seemed like no one there was from there (including us). Everyone came from somewhere else as Atlanta serves as some kind of young professional waypoint. People come and people go in Atlanta as the general economy waxes and wanes.

Socially and emotionally, the transition for our family was easy. After spending several years becoming more involved in the business community here in Birmingham, one thing struck me as the start of the football season grew near.

From a business and economic development standpoint Birmingham is the Marv Levy of cities.

Let me elaborate on that awkward comparison.

Marv Levy is a first-ballot NFL Hall of Fame coach and has one of the most interesting legacies in the history of football. He took the Buffalo Bills to 4 consecutive Super Bowls- losing all four. Some regard that as abject failure while others recognize it as one of the most impressive runs in professional coaching simply based on the incredible odds against reaching the championship game 4 years in a row. It had to be excruciating to get that close and not reach the pinnacle of success.

Much like Marv Levy’s Bills, Birmingham’s success or failure is largely based on the perspective of the interpreter. I think it’s fair to say the city has often taken two steps forward to take one, two or even three back in some cases.

Birmingham was a juggernaut in the steel industry because the three main components to make steel were in close proximity to the city. Foundries, furnaces and mines popped up everywhere with more than 26,000 people employed in some facet of steel and iron production.

This steel boon contributed to Birmingham receiving its nickname- The Magic City. At the beginning of the 20th century, Birmingham expanded in population and infrastructure at such a rapid rate, it was considered to be just like “magic.”

Two steps forward.

In the 1940s, Birmingham raised the aviation fuel tax while courting Delta Airlines to place their hub here. Delta chose Atlanta- something that has played a major role in our neighbor to the east establishing itself as a major economic city, eventually getting the Olympics and proceeding to grow like crazy. That also created a durable disdain for Atlanta in older Birmingham social circles.

One step back.

Birmingham’s history is complex. It is recognized as a successful pioneer in heavy industry while also being glacially slow to recognize the responsibility of driving social progress and civil rights. This historical dichotomy should create a crippling gravity working against innovation, development and growth.

Thankfully, we have a whole new group of entrepreneurs in Birmingham that remind us just how close we are to realizing our full potential as a city and region.

Having spent some time with several companies at Birmingham’s Innovation Depot, talking with the newly-minted entrepreneurs at Co-Starters in Woodlawn and donating time to Rev Birmingham, I am reminded of the famous Marv Levy quote:

“Where else would you rather be than right here, right now?”

In many ways, it feels like the Birmingham entrepreneurial community has ripped off the rear view mirrors and put the pedal flat against the floor despite the disadvantages we have inherited or have self-inflicted.

We have high tech companies like VIPAAR providing virtual augmented reality allowing surgeons to consult with other surgeons thousands of miles away, in real time, as surgeries are being performed. Motus Motorcycles, the first American-manufactured and designed sport touring motorcycle, started delivering bikes to their first customers in the last 60 days. Other creative businesses like Revelator Coffee who literally make each cup of coffee by hand and craft brewers Good People, Trim Tab, Avondale and Cahaba appear to embrace and leverage the advantages of our small enclave. Their success may be because of Birmingham or in spite of it but that doesn’t really matter.

What matters is that Birmingham has developed a meaningful entrepreneurial community of products and services. Birmingham is showing that is doesn’t need or even want to be Nashville, Atlanta or Dallas. As my friend Deon Gordon, the head of Business Development for Rev Birmingham says, “We are trying to be the best Birmingham we can be.” The unique combination of stubbornness, naivety, creativity and crocodile skin among our entrepreneurs has created an up and coming business community for which I am equally proud and excited.

Like Levy’s Bills, Birmingham routinely gets so close to what feels like ultimate success but just hasn’t reached the level where our entrepreneurs are widely celebrated. Far from just getting a participation trophy, Birmingham entrepreneurs have already succeeded by striving to get better every day- even if that isn’t fully appreciated by the general population. We… are… so… close…

So I ask you- “Where else would you rather be than right here, right now?”

27 Aug 2015
Sticky Post By Posted in Entrepreneurship, Start-ups With No Comments Permalink

Founders: your peer group may just be a Taco Fan Club

Sticky Post By On August 27, 2015 With No Comments

The learning curve for any start-up is steep and immediate. For successful founders, that learning happens exponentially and early mistakes turn into valuable guideposts for future decision-making. As these founders figure out how to simultaneously be the CFO, CEO, CMO, CSO and Director of Custodial Services, they are forced to do all the things needed to lead their company.

It is lonely at the top, and founders are used to making most, if not all, decisions of consequence. This creates an incredible growth experience for them as professionals but the stress and doubt created in the responsibility of concentrated authority can be overwhelming.

One of the ways many founders cope with this is to form or join a peer group. These groups come in many flavors and range from completely informal to highly structured. Some start-up companies even use these in lieu of advisory boards. Unfortunately, some of these return questionable value because they serve more as mutual admiration clubs than members who push each other to overcome business obstacles.

Talking to some tech founders about their own peer groups at a networking event recently, I asked some questions about the groups they had created and how they operated, one theme seemed to repeat itself. These founders sought out people that were just like them. They wanted peer groups made up exclusively of members in their exact same business, market and technology space. After asking a series of follow-up questions, it was obvious they wanted validation more than they wanted to be challenged to adopt new strategies. They wanted to commiserate with their peer groups about topics like customer expectations, overseas pricing competition and the challenges of finding the best taco in town.

I didn’t make that taco thing up. One founder actually told me he had spent the better part of an afternoon discussing the best taco place with his peer group on Slack.

Setting aside the obvious value of locating the best tacos, I did find this self-inflicted tunnel vision fascinating.

At one point I challenged one of those founders stating, despite what he thought, “All problems weren’t created in a SAAS company and they haven’t all been solved by a SAAS company.”

This isn’t to pick on him, start-up founders or SAAS companies. I’ve met many people who create these cocoons of group think and herd together in like-minded groups who have more interest in propping each other up than challenging each other to get better.

It’s very important to have people around you that support, love and encourage you unconditionally. It is equally important to have a cohort that challenges you and holds you accountable. Ideally, you have both. Everyone can benefit from a mentor or group of people that is dissimilar and creates some friction of thought or mindset. If everyone around you is exactly like you, your chances to learn and grow diminish exponentially.

Having a peer group that only disagrees about whether hot or mild salsa is best for a taco probably won’t create the discourse required to grow and develop your business.

04 Aug 2015
Sticky Post By Posted in Business Headlines, Finance, Funding, Start-ups With No Comments Permalink

Profit: The Inconvenient Metric for Start-up Businesses

Sticky Post By On August 4, 2015 With No Comments

Marc Andreessen recently tweeted a reminder that a company’s stock or valuation is based on future performance—not current performance. He is, of course, correct.

I have been following, with great interest, the ongoing debate about current Venture Capital, Private Equity and Start-up funding activity over the last 5 years and if it has created another bubble. The money guys will tell you it’s very different than in the 90’s where EBITDA, not profitability, was the accepted measure of a tech company’s performance, IPOs were the preferred method of raising significant capital and investment banks didn’t really understand the technology.

I would argue the institutional money guys still don’t really understand the technology. Currently, raising money through private equity is the preferred path for many tech companies where everyone wanted an IPO in the 90’s. I would argue it is the same cow by a different name.

After Uber disclosed an operating loss of $470 million, it received enough participation in its latest bond offering to signal a valuation of over $50 billion. That’s right… $50 billion valuation on a company that lost $470 million last year and doesn’t even explain how or why it lost it before new investment dollars fly in through a bond offering.

At some point, profitability must have a far greater stake in the measurement of a company’s viability. Scaling a company through self-funding is slow and incremental. It can be tedious and frustrating.

This emphasis on profitability isn’t happening because the private equity market is flush with cash—enabling and encouraging start-ups to embrace concepts like “run-rate, IRR and total addressable market” to justify their race to scale at the cost of profitability. This is the rub. Private investment wants to see growth—especially top-line revenue. Profitability is assumed to be coming at some point—even when there are no strong indicators this will actually happen.

Revenues still rule in financing rounds. If you show exponentially increased revenues from the previous round, your valuation usually goes up. What if, instead of top-line revenue, PE shops saw profitability increasing on the same revenue numbers from the previous round?

Unfortunately, it is reasonable to assume the valuation suffers even though the founders were actually running a better company.

So what should a start-up do?

Elliot Bohm, the CEO of Card Cash offers a very reasonable strategy is his Inc Article, “Why you shouldn’t always be looking for Venture Capital.”

He proposes the strategy they executed at Card Cash which was to take an initial round from a VC fund which adds brand credibility and allows you to build your business and then use traditional debt funding to grow.

This, of course, requires startups to get off the milk wagon of private equity and focus on building a business where profitability is part of the strategy. To use traditional debt like short-term loans, you have to prove you can actually service that debt. Banks are a for-profit business so they aren’t likely to loan material amounts of money to a business that can’t create net income.

Private equity models work and they can help a good company and concept become great through financial support. They can also enable less than responsible behavior as startups enjoy playing with other people’s money.

Truly durable companies are profitable companies. The longer start-ups focus on the value of an exit and how many rounds of financing they can execute, the less likely they are to see a profit. It would be almost revolutionary to see the prestige of “exits” be replaced by the elusive, but more impressive measurement—profitability.

15 Jul 2015
Sticky Post By Posted in Sales, Strategy With No Comments Permalink

If you don’t understand your success, you are going to fail

Sticky Post By On July 15, 2015 With No Comments

You just got the email—you lost that deal to a competitor… again. This was the big one. The contract that was going to set your future success and allow your firm to grow its revenue and reputation.

Meetings are called immediately to review why the deal was lost, where it potentially fell apart and how you will take steps to make sure it doesn’t happen again. The sales management team, senior leadership and even the salesperson trying to consummate the deal are all in the room to pour over each detail.

This, of course, is both a reasonable and effective strategy to push improvement in your business and work toward losing fewer deals in the future.

But let’s flip the scenario.

The call comes in letting you know you won that deal you have been working 6 months to close. This was a big one. The contract that is going to set your future success and allow your firm to grow its revenue and reputation.

Immediately after, congratulatory emails and calls are received and maybe your team goes to happy hour to celebrate.

There is something missing here.

Why was there no meeting called to review the win? Why did you win it, where did the deal all come together, who stepped up? Most importantly, how will you make sure it DOES happen again?

We are quick to find faults and critique failures in our business efforts—it’s what business schools, mentors and continuous improvement experts have taught us to do. We are really good at it. Why, then, do we not apply that same discipline to positive outcomes?

Having spent quite a few years in sales, this hypocritical scenario played itself out with the reliability of a Swiss watch. Losses are examined, dissected and even used as political fodder among conniving managers bucking for the next promotion. Wins are usually recognized, briefly celebrated and then fade quickly among the competing business priorities.

Not understanding your success is a direct route to failure. Assuming your business wants more successes, it only makes sense that you should understand what made you successful in tremendous detail. Simply looking at where you failed provides a “Don’t do” list. Wins provide part of the road map for your organization.

Start looking at your wins and go back, where possible, and look at previous successes. This is not just an exercise for sales. Organizational successes happen every day in your HR, finance, recruiting and IT departments. Understanding WHY and HOW you won are as important as why you may have failed so treat those wins with the same scrutiny. You should know how to replicate your success as much as avoiding failure.

15 Jul 2015
Sticky Post By Posted in Strategy With No Comments Permalink

The “Best Practice” Bandwagon is Costing Your Business

Sticky Post By On July 15, 2015 With No Comments

In the mid-1800’s, P.T. Barnum and his Flying Circus used to parade through towns on something he coined the “bandwagon.” It was gaudy, hard to miss, and a great marketing tool to let people know the circus was in town. Later, politicians used the same method to gain attention for their message, and it worked. People are drawn to the latest and greatest spectacle, even if it’s not strategic for them.

People jump on these bandwagons because something bad or unwanted has not happened to those driving the bandwagon and as such, they are protected from harm. This creates a false sense of security when your business is doing well in well established markets and market conditions for your product is good. To state the obvious, many businesses get on the bandwagon after the parade has passed.

One bandwagon phrase that is particularly troubling is “best practices.” The term is generic, overused and does not consider your business’s specific circumstances. Many times, best practices do not fit a small company’s strategy because they require extensive resources to implement and maintain. Best practices are a by-product of a good strategic plan. If implemented correctly, your strategic plan will continually adapt to the best practice that meets your company’s goals for sales, operations, and customer service.

In the small business world, it is often rare to have a published strategic plan that actually drives what everyone in the company does. If the strategic plan in not well-defined, there will likely be counter acting forces within the company working against each other that will prevent your success. The key is to develop the following as part of your strategic plan:

  • A measurement system to monitor results toward the plan’s goal
  • A recruitment system that will not only hire but keep good employees to drive the plan
  • An incentive system to drive the plan
  • A cohesive team that works together to achieve the goals of the plan
  • A culture that continually adapts and adjusts to drive the plan
  • Continuous training to support your strategic goals

Last but not least, it is important to get someone from outside of your company to give input periodically. An objective third party who has experience creating and executing against complex strategic plans can help a company set the goals and strategy necessary to win. Outsiders also won’t be protecting turf or acting in their own department’s self-interest so they are much more likely to provide unbiased input.

With the right strategy and employing the right resources, I believe that small businesses can lead instead of getting on the latest bandwagon—and driving new and innovative ways of doing business that will help them reach their goals.

03 Jul 2015
Sticky Post By Posted in Entrepreneurship With No Comments Permalink

Founders: If you can’t do this one thing, quit

Sticky Post By On July 3, 2015 With No Comments

The first time I sit down with company founders to start a project, I ask a lot of questions. Most of the questions are about their business, products, people, structure and goals. But there is one “fill in the blank” type question I usually ask them to answer that generates a lot of value:

“If I can’t do this, I’m not interested in the business continuing: __________”

This question serves multiple purposes but it cuts directly to the core of WHY.

Asking this question, I can start to understand why they work all the hours they do, why they haven’t taken a vacation in 3 years, why they are taking Ambien to fall asleep at least three night a week, why they are willing to constantly fight the battle waging between their professional success and they personal happiness.

Something really interesting happens right after I ask this question. I either get an almost instant response that comes from a sacred and principled place inside that founder or… a blank stare.

Not surprisingly, those who provide that concise and guttural answer have a strong compass to reference as they strive to build something great. They are also, not coincidently, the founders who are killing it.

Those with the blank stare look like someone just stole their lunch money.

If you are a founder, you probably have this answer in some stage of resolution- it may be iron clad, it may me a bit fuzzy or it doesn’t exist at all. If your answer is something less than resolute, you need to fill in that blank sooner than later.

Founders often start companies with a whole series of goals, hypotheses and intended outcomes. Those usually get trashed within the first 30 days. That’s what is supposed to happen but having this core question answered helps navigate the near constant uncertainty that creeps into your business every day.

If there is truly no answer for this question, quit. Quit and start something else. It really is that core to who you are as a founder and, by extension, the motivating principle of your business.

I love what I do. For so many reasons, starting my own company was the best thing I could do to grow as a professional and as a person. After 15 years of working for others, I found a way to take the pieces and parts of what really motivated me and turn it into my own business. I decided, pretty early on, that I would have some “rules” which is the genesis of me asking others the question above.

My answer to this question is simple: If I can’t build a company that delivers significant value and is considered best-of-breed, I will shut it down.

I also vowed I wouldn’t work with a-holes. But hey, that’s just me…

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