The book by Rob Adams – “A Good Hard Kick in the Ass ” is a must-read for anyone who intends to open a business and become an entrepreneur.
Everyone who believes in these myths needs a soft kick in the ass because they don’t know anything about how, in the real world, in competitive markets where the winner gets everything, successful companies are created and developed.
Rob Adams is the founder and director of AV Labs, a new venture capital company. Before starting this company, he worked for Lotus Development (participated in developing Notes 1-2-3 for Macintosh computers), Pervasive Software (which he helped to become an open joint-stock company in 1997), and Business Matters (the company he founded, which specializes in financial forecasting and modeling). Mr. Adams has a degree in engineering and an MBA.
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Five Key Steps to Bring a Product to Market
- Make sure the market really exists.
- Develop a profitable business model.
- Create an effective team.
- Find investors.
- Show that the product can be made.
In essence, as long as you are guided by the basic principles, nothing else really matters. As simple as possible, a business exists in order to make money. If you do not have a clear and logical plan on how to achieve this, do not even think about creating a new company. You better work for someone else who already has one.
“I have been dealing with new companies all my life, and I am amazed at how many myths get in the way of an entrepreneur.”
Who believes in all this nonsense?
I heard an experienced top manager of one corporation say: “The Internet is a $ 50 billion market, and we will occupy half a percent on it.” People who spent decades developing sophisticated technology said: “All we need for marketing is advertising.” What can you say about the words of a representative of one of the Fortune 500 companies creating a new division: “We have no competitors” ?!
All I could say in response: “Dream!”
Get rid of all this business nonsense that people believe in.
There is only one way to success.
Hard work and commitment to basic principles.
- Strive to create a good team and not have a good idea
Almost all entrepreneurs are in love with their ideas. However, the world is full of good ideas. What is missing is the ability to realize a good idea. Therefore, it is much more important to put together a team with “ability to realize” than to have a terrific idea.
Almost all entrepreneurs have a deep passion for their ideas and believe that they do not have competitors who do the same. A request to sign a non-disclosure agreement is one of the hallmarks of a person who is passionately loving his idea. Also, these people are usually interested in such non-essential factors as, for example, the desire to be the first in the market or to be unique.
The problem is that you are actually interested in the fact that there is competition in order to make sure that the market is ready for the perception of the product you created.
Therefore, it is important to have not a unique idea, but a solid business concept, which:
- Is a new approach to existing business processes.
- Able to demonstrate the viability and competitiveness of its solutions in which the market is in need.
- It targets a large market with a turnover of at least $ 1 billion per year.
- Have large additional markets – vertical (this solution can be applied in other markets) or horizontal (the solution can be modified over time in order to attract several different markets).
- Can be implemented by a management team that has experience embodiment of ideas and know-how. The success or failure of most new ventures depends on a management team capable of implementing the idea. In a generalized form, the ability to realize is the ability of a group of people to make a business concept work in the market.
The ability to implement consists of:
- Practical or specialized knowledge: those who have already been there and have done it, therefore, personally know what is needed to repeat success. Such knowledge is possessed by those who personally know the market space in which the company is going to compete.
- The experience of mistakes: it is for those who have gone through ups and downs in managing a growing company and are familiar with all the problems that arise at the growth stage. Survivors of this experience know-how growth can affect the organization’s infrastructure and system.
- Competition experience: people who know what it is
to survive in competition, people who have achieved good financing and have large financial resources. It is possessed by those who know how to use a competitor in order to increase the growth rate of their own company.
- Experience in risk management: it allows you to dodge the blows in a rapidly growing, ever-changing market. It is for those who are able to change rapidly, receiving new information and using new opportunities.
- The necessary experience, consisting of marketing know-how, new product development skills, sales management experience and any other experience important to the investor.
- Leadership abilities: those who have real experience in hiring, creating and maintaining a strong team of good employees.
It is true that most of the management teams of new companies do not at first have a great ability to implement, however, teams should know what they need. Some of the elements that make up the ability to realize an idea can be supplemented by part-time consultants or board members.
Effective entrepreneurs value a good management team above the original idea and intuitively understand what range of implementation abilities need to be acquired in the future.
“There are always plenty of good ideas – there is a lack of a team that could implement a good idea .” Rob Adams
Learn as Much as You Can About Your Customers.
Every entrepreneur thinks that he knows what consumers want. “It’s simple: they will want what I want to offer them.” This is a dangerous illusion that always leads to the use of such an approach to business organization as “Get ready – fire – target”.
Experienced entrepreneurs know that they need to study the real market in order to apply the more effective “Prepare-Aim-Fire” approach.
Examine the market before you start developing a product or writing a business plan:
- You have a good chance of developing something that consumers will really pay for, and not say that it looks pretty interesting.
- You can get the right product the first time, saving resources, that would be spent on an unsuccessful first attempt.
- You can create a community of user enthusiasts who will help you improve your product in the future.
- You will know who is most in need of the solution you offer and which markets have the most potential customers.
- You spend your capital more efficiently and wisely, based on your knowledge, and not on your hopes.
- It will be easier for you to recognize your competitors because consumers will tell you what other products they are currently using.
- It will be easier for you to attract smart investment capital because potential investors will have real feedback with real consumers and they will have experience in order to use this data when making decisions.
When checking the market, you need to make sure that the initial target market already exists and that consumers within this market have a need that your product will satisfy. In other words, you have to show that the target market will buy what you offer it.
The size of the target market can be determined using a three-step approach:
- Step 1. Investigate the need.
- Step 2. Introduce the solution.
- Step 3. Build trust.
Remember that markets are constantly evolving. Therefore, at best, a market check will look like a snapshot. You must remain focused on the consumer and be aware of the changes.
Check the market again and again. Either you do it or you lose your advantage – the first step to becoming “dead meat. ” Rob Adams
Enter the Market as Quickly as Possible With What You Have! Immediately!
Once you have determined what your potential customers ’needs are, you may be tempted to put the product on the market until you develop a killer product that can solve all aspects of the problem. If you try to do this, then “burn” all your main resources. It is much better to bring version 1.0 of your product to the market with a minimum set of features as soon as possible. Then continue to improve the product, developing future versions.
Enter the market as quickly as possible, even if it pushes you to create partnerships with those whose product complements yours.
All entrepreneurs draw in their imagination a complete and comprehensive solution to the consumer problem – creating a killer product that will satisfy all potential customers. In order to develop such a product, it takes much more time and money than the new enterprise has. Therefore, it is much better to enter the market as early as possible with the first product option containing a minimum set of functions or to merge with other companies that produce products that can complement your product.
Advantages of quick entry to the market:
- You continue to check the market, making sure that the target market for your product is ready. Real sales are the best way to do this.
- You will need less investment – this means that the level of risk decreases.
- Senior executives are always attracted to a quick market entry strategy.
- Increases your ability to get additional capital at a more attractive price in the later stages of financing.
- Your first consumers will begin to recommend your product to their friends, acquaintances, and colleagues.
If you are not able to quickly enter the market, find partners for work.
They can help you solve the most difficult aspects of the problem for you. You can integrate their products or services and your ideas, thereby positioning your company as a solution provider. If the key features of your product are being used elsewhere, consider licensing.
Do not create the product yourself if other more affordable business options are possible.
A good partner:
- Will contribute to the development of a product that you would not be able to create on your own without serious investment.
- Able to provide key components for the implementation of ideas, marketing support, trust and access to other project participants.
- For him, the alliance will be as beneficial as for you.
If the lack of market verification is the main reason for the” erosion “of the shareholding of the founder’s team, then the supply of the killer product is the main reason for the complete failure .” Rob Adams
Find as Much Capital as You Need in Order to Reach the Next Level.
Most entrepreneurs believe that in order to succeed, you need serious capital. At the same time, $ 10 million is usually regarded as an adequate round number needed to bring a product to the market in order to no longer worry about finding the money. Such an idea has nothing to do with what successful entrepreneurs do. They go through many stages of financing, each of which involves receiving only the amount of money that is necessary to move to the next stage.
If you get a lot of money right away:
- There is a temptation to spend money on something that does not create added value (for example, infrastructure and advertising);
- Ownership share of company founders and investors in the early stages company development is being seriously eroded.
The second point is especially important. A new company costs much less than an enterprise that has already begun selling its products. Therefore, the sooner you attract external investors, the greater the share they will demand their capital injections.
The best approach to money is to be “implementation-oriented,” that is, to concentrate on moving the enterprise from one stage to the next. Each time you manage to take the enterprise to the next level, it automatically starts to cost more, which means that you need to give less in order to attract the financing that you need.
A reasonable approach to financing is to obtain only the capital that will be used to move to the next level.
And do not forget that it always takes more time to search for money than you expected, so you need a small margin of time to make it possible to continue working while the next stage of financing is provided, which often takes six months or more.
The goal of a growing company is to start a positive cycle of changes in which the company gradually increases its value and provides financing to various investors. Each stage of financing should begin the next cycle.
Key thought: “Why is it important to take a thorough, step-by-step approach to make money? Why should you only get paid after your company’s value has increased? That’s why: because of the enormous risk inherent in today’s fast-paced market.
Until about the early 1990s, engineering itself was a major risk. Today, technical risk is not so high. The greatest risk is a market risk. The risk that you will be out of the market. The risk that you will bring the product to the market and direct it to the wrong place. The risk that you will have to regroup and find even more money – you may need to do this several times. That is why most modern companies fail: they are not able to bring the appropriate product to the appropriate market, spending a reasonable amount of money.
If you plan to get a lot of money, do it only after you reduce the risk . “Rob Adams
Investors Finance Good Teams, Not Business Plans
Investors do not finance business plans. They fund real profit opportunities. This creates the opportunity for a cohesive management team to effectively respond to the real and urgent needs of the market.
A business plan is actually a preparation for financing negotiations, for which the management team is responsible.
Regardless of scope, business plans are a vision of the future of the company. They are the result of the thoughts of the management team, showing where the company wants to go. However, no investor will provide financing solely on the basis of a business plan. Before doing this, investors will want to personally meet with the management team. Thus, in many ways, the real benefit of writing a business plan is that it makes you prepare for financing negotiations.
Therefore, instead of reading a detailed business plan, most investors will want to know:
- What is the level of ability to implement your management team?
- How carefully you checked the market where you intend to market your product or service.
- When you bring the product to the market
- How much money is needed in order to develop a company and get a real profit?
These factors can only be determined during a one-on-one meeting in financing negotiations. In these negotiations, the team tries to demonstrate that it has the energy, enthusiasm and know-how necessary to truly create the appropriate product or service. Financing negotiations are an attempt to sell your company.
Effective presentation in financing negotiations:
- Lasts about 20 minutes.
- Uses no more than 12 PowerPoint slides.
- Involves the participation of all team members.
- Demonstrates competence and energy.
- Must be able to adapt to the preferences of the target audience.
Writing a business plan is a great preparation for a logical and convincing presentation. The process is important, not what will be received in reality.
” Using a business plan to get financing is like sending an advertising brochure to a potential consumer, and then sitting there and waiting for a check to come to you. That doesn’t work .” Rob Adams
Good Investors Always Expect to Get Quality Returns..
Good investors will always be interested in long-term prospects, and not try to get a quick return on invested money. Successful new companies know that there are many potential investors and are therefore picky. They are looking for investors who will add value to their business and provide smart money.
Smart money is money provided by investors who are attracted to what you are trying to do, and they understand this.
Choose your investors based on whether they have or not:
- Experience in your business area — for example, they have already made successful investments in the same field.
- Exposure – the ability to continue to support you when things go wrong as planned.
- Suitable personal characteristics – the personality types of investors and entrepreneurs should ideally correspond to each other.
- The ability to complement your core competencies with skills and know-how.
- Investment insight – to understand that quality returns require considerable time and effort.
- A solid list of successes in the past.
In order to get “smart money”, you need to take the initiative in your own hands and find investors who have the necessary funds to do everything necessary to create value. Choose your investors carefully and thoughtfully, as they will have a significant impact on your future success. Smart money is provided by investors who not only have a realistic idea of when the returns will be received, but can also provide all kinds of additional benefits.
“Your company may require either one type of investor or a certain combination of them. Your ideal composition of investors depends on what stage of development you are at, the potential of your company in the market, your ultimate goals (to become an open joint stock company, to be bought, or just to work as a private enterprise for several years) and many other factors. Your combination of investors should increase your company’s ability to deliver ideas . “Rob Adams
Understand the Difference Between Marketing and Advertising.
Most entrepreneurs believe that advertising and marketing are one and the same. It’s a delusion. Advertising is expensive, its effectiveness is difficult to measure. Good marketing is a continuation of the market audit program.
Advertising makes sense only if the product is already formed and developed for the mass market. In the early stages of a company’s development, marketing is needed, not advertising.
Market testing complements marketing by providing:
- Information on the exact nature of the consumer problem.
- Identification of the initial segment of the target audience, where the need is most strong.
- Understanding what characteristics and functions of the product will be most important at the initial stage.
- Consumer communities – the first consumers to agree to work with you to create and improve a product that solves their problem.
- Support industry analysts within your target market.
After the market is tested, you define your product in such a way that it:
- Corresponds to what consumers want and solve their problems.
- Consistent with what consumers tell you about what they need and what they want.
- Helped users achieve something they want.
After defining the product, your next step is to create awareness of the product and ensure the demand for it. This usually involves the use of:
- Events on public relations – the preparation of press releases, articles in the industry press and other materials in the media.
- Relations with industry analysts, who are key players and the most influential people who need to be attracted to your site in order to gain the attention and support of the media.
- Branding, with the help of which the desired image of your product is created and then enhanced.
- Strategic alliances with companies that sell goods and services that add value to your products.
The greater the hype surrounding your product, the better it will sell.
Until you turn your interest in your products into sales, when consumers really open their wallets and pay for your product, all your other efforts will be futile. You will win consumers by:
- Direct marketing, using the mailing list, in order to encourage those who are ready to make a purchase right now to take action.
- Telemarketing – contacting the target market via telephone.
- Trade shows – industry events where you have the opportunity to showcase your product.
“ Define a product, create hype, win consumers. How to do all this? Using a strategy that is a continuation of market testing. How to implement this strategy? Not forgetting that it should change in accordance with changes in the market. You must remain flexible. You have to develop a new strategy when the market demands it . “Rob Adams
Master the Marketing Process. Learn to Sell.
The new company must manage its sales because no one else will be so interested in generating sales. Partners will have their own priority list. You must do this if you want to have a real chance of success.
Selling your product when people open their wallets and buy your product is an extreme form of market testing because:
- There is an impetus to the market: market demand confirms the correctness of your research.
- A consumer base is beginning to form – people who use your product, who can recommend it to others, thereby increasing sales in the future.
- The product begins to evolve and improve thanks to the established feedback with real consumers.
- Your energy is transmitted to others, making them as passionate as you are.
In fact, sales for a new company are so vital that everyone in the company should feel responsible for the sale. The new company will not earn enough to expand and increase its overhead costs until people start buying what the company offers. Everything else will be costly, while sales will begin to generate profits, which the company can then increase in the future.
” I have always been embarrassed by the talk of entrepreneurs that partners sell their products.. You may fall into this trap when you decide that you just need to sign an agreement with some major market player – IBM, Microsoft, Dell, Cisco, etc. You can be sure that they will add your solution to their product list , and while your partner’s sellers provide high sales volumes for your product, you and your team can safely work to improve it. This will be a misconception because such a scheme does not work . “Rob Adams
Avoid Complacency – Keep the Entrepreneurial Spark
A large company can continue its growth only if it acts as if it is a new developing enterprise. Mature companies focus on protecting their market share, while new companies focus on winning market share from other companies. The key to the long-term success of any company is maintaining an entrepreneurial mindset.
If a mature company tries to defend its position at all costs, it stops thinking innovatively, and this is the right way to stop responding to changes in the market. Therefore, the only way to maintain a leading position is to continue to act as a new venture.
More specifically, a mature company can act as a new venture:
- Ensuring that each new employee creates real added value, and not just increasing the overall costs of the company.
- Rewarding people who create the greatest added value in the same way as new enterprises do, that is, using bonuses, promotions and providing the opportunity to have their share in the created property.
- Continuing to test the market, focusing on consumer issues and developing products that can solve them.
- Bringing the activities of all employees in line with the general vision of the company – so that everyone acts in concert to meet the needs of consumers.
- Developing new products in line with core competencies sales models, which means setting the appropriate price for new products and positioning them so that the sales staff is appropriately motivated and rewarded.
- Supporting entrepreneurial thinking, encouraging and rewarding good ideas and ensuring sufficient autonomy of workers in their activities.
- Eliminating bureaucratic restrictions, minimizing interference and thereby allowing you to make decisions quickly.
- Assuming a certain risk, that is, using all the opportunities that arise and exploring their prospects.
- Motivating employees to solve consumer problems, rather than worrying about internal problems and civil strife. Ideally, any internal presentation should be based on a solution to a specific consumer problem.
- Concentrating on what your company does best, and attracting partners who can enrich you with new skills and technologies.
- By creating small, dynamic teams and departments, as they are always better at responding to customer needs than any large company unit.
- Continuing to invest in a new generation of products, even when you are busy with routine everyday tasks.
- Maintaining direct contact with consumers.
- Improving the product.
- Creating value at every stage.
“ Don’t worry about your business plan. This is nothing more than a corporate brochure.Think instead. About the ability to implement. To consumers. Product and market. Solve these problems, and the plan will be written by yourself. In addition, your presentation to investors will be more accurate, thoughtful and convincing. And investors are more likely to give you money. “Rob Adams
If potential entrepreneurs cannot get rid of their delusions and do not return to the basic principles described in this book, they will have little chance of success.
- Principle #1. Strive to create a good team – not to have a good idea.
- Principle #2. Find out as much as you can about your customers.
- Principle #3. Enter the market as quickly as possible with what you have! Immediately!
- Principle #4. Find as much capital as you need in order to reach the next level.
- Principle #5. Investors finance good teams – not business plans
- Principle #6. Good investors always expect to get quality returns.
- Principle #7. Understand the difference between marketing and advertising.
- Principle #8. Master of the marketing process. Learn to sell.
- Principle #9. Avoid complacency – keep the entrepreneurial spark.
If potential entrepreneurs can not get rid of their delusions and do not return to the basic principles described in this book, they will have little chance of success.
Why You Should Read “A Good Hard Kick in the Ass”
- To make a profitable business
- To find funding for your project
- To become a successful entrepreneur
This book is available as: