Steve Parks

I'm heading to London in the morning to take part in a debate at the start of Enterprise Week.

The theme of the debate is "In the current economic climate, can entrepreneurs change the world?"

Details can be found at:
http://www.enterpriseweek.org.uk/get_involved_in/the_debate

Without doubt the challenges for entrepreneurs are intense at the moment - but the opportunities are still there, and those that get their business quickly in the right shape and doing the right (focused) things will come out the other end stronger and more successful.

I've been doing a series of posts on what it takes to achieve this, and in this one I'm looking at the concept of Lean Startups.

'Lean' was developed by Toyota as a way of massively improving their business, and its since been successfully applied in many industries.

So how can you apply the ideas in startups?

Here's a collection of articles you need to read!
http://startuplessonslearned.blogspot.com/2008/09/lean-startup.html
http://venturehacks.com/articles/lean-startups

Here's a slideshow of a presentation on the subject:

And here's an audio podcast of a speech on the subject:

A lot of food for thought here. What are the key ideas you pick up from it all?

Since writing my last post about the Obama campaign, I've just come across a great quote from his new chief-of-staff, Rahm Emanuel:

"You don't ever want a crisis to go to waste; it's an opportunity to do important things that you would otherwise avoid. In 1974 and 1978 we never dealt with it, and our dependence on foreign oil never changed."

I love this quote.

In a crisis, like the current economic problems that are probably impacting your company in some way, the first priority is survival - but it is then a real opportunity to make changes that you would never get round to making, or couldn't get away with making, in the good times.

Everyone knows times are tight, so maybe now is the time to really cut back on waste of time, money and resources. Maybe it's time to implement a tougher credit application and credit control procedure and attitude. Maybe it's time to become a firmer manager (but still fair). Maybe it's time to demand more from your suppliers (in return for being a great customer) - or shop around for new suppliers.

Maybe it's even time to change what you do or how you do it?

Or what's the equivalent for your business of the foreign oil that the USA is so reliant on? Who outside the business is able to put a squeeze on you? Make a change, and make it now.

What would you really like to change about your business but have never got round to?

Use the current impetus you have to solve problems to make these changes too.

Don't let a crisis go to waste.

For the last couple of weeks we've been working on a major relaunch of the FlyingStartups online community I run for entrepreneurs.

The website supports my books for entrepreneurs, and allows members (it's free to join) to share ideas, experiences and advice.

Entrepreneurs keep a regular diary of their progress in starting their businesses - and those make fascinating reading.

I first launched it back in 2003, so it's great to see the community still going strong.

Visit the site at: www.flyingstartups.com

I'm pleased to announce the first of a new series of FlyingStartups training workshops.

Beat the Crunch is a day-long session in which I, and professional trainers, will examine how to get yourself and your business in the right state to survive and even thrive in these difficult times.

We'll draw on advice from entrepreneurs who have been in tough situations before, the ideas in my books, and the shared experiences of the delegates.

The workshop is in central London on Saturday 22nd November 2008 with a special offer for those who book before the end of October. Book your place now! I'll look forward to meeting you.

Find out more details here.

The Silicon Valley blogs have been buzzing over the last few days with details of a number of presentations and letters to hi-tech companies by their venture capital backers. These presentations were designed to inform CEOs about the outlook for the economy, and share the experiences and advice of the investors - all with the intention of helping their companies survive.

I'm going to summarise them here, because they give a very interesting and insightful perspective - and some great advice.

Sequioa

Sequia Capital is possibly Silicon Valley's most respected venture capital firm. They've backed many of the web's best-known companies from their first steps.

Last week they held a meeting for the CEOs of their investee companies - with the intention of delivering a short sharp shock.

Here are the slides from the presentation:

The analysis in here is fantastic - and well worth studying in depth. But the key messages are:

1. This is not a short term problem. Prepare for tough years rather than months. Don't expect bumper good times to return for 15 years.
2. You need to make sure your company is cashflow positive.
3. You need to cut costs (but smartly - my addition), reviewing salaries, using commissions and other performance incentives - and using zero based budgeting (more in a later post on this).
4. Focus on only the genuinely valuable and likely sales in your pipeline, get rid of the noise.
5. Spend every dollar as if it were your last.

Benchmark Capital

This VC firm has lots of similar advice, but it was particularly interesting to read them quoting a CEO they know who went through the dotcom crash...

Recently, I spoke with an entrepreneur who as a CEO during the dot‐com crash and oversaw a headcount reduction from 130 to 28 (through two major layoffs), and eventually back to profitability and an IPO. If you think a 10% layoff is tough, imagine laying‐off 78% of your employees. It is one of the hardest things I have ever seen anyone do. I recently asked him how that experience has shaped the way he ould advise people on running a startup. He had a list at the tip of his tongue (included now):

1. You don’t realize how fast things spin out of control. There are self‐reinforcing negative affects in a downturn.
2. Don’t spend money until you have to
a. Don’t move out of your office until you are sitting on top of one another
b. Don’t hire any incremental employee until you just can’t stand it
c. Don’t get more capacity in your data center until your site is going down
3. Better to be “late to the party” than to be early and run out of money
4. Line item review of the budget every month (legal, accounting, everything)
5. Not just a CEO mindset, but a company mindset
a. Everyone must buy into the process
b. But in a calm way - not run for the hills
6. Create 2 or 3 different burn scenarios - know at any point in time how many months of cash is left.

Ron Conway

And finally, angel investor Ron Conway sent these emails to the companies he has stakes in.

In summary

All three of these experienced investors give similar advice - essentially:
1. Cut costs wisely
2. Plan for this lasting a long time
3. Don't expect to be able to raise outside funding
4. Watch the cash flow like a hawk!
5. Act quickly

I'll be writing more blog posts soon about the economic situation and what it means for entrepreneurs in terms of threats - and opportunities.

The gravity of the economic crisis will not have escaped you. You're probably well aware that there is no quick fix and we're in for a long hard couple of years.

But this doesn't mean entrepreneurs should despair, panic or get out of the game. Imagine if lots of pipes burst creating a big flood - and all the plumbers decided to give up?

It's entrepreneurs that the world is relying on to get out there, run their businesses, employ people, create real value and fix the global economy.

The small-minded managers in big businesses are going to get it all wrong. That's guaranteed. They'll cut spend on marketing, training, product development and quality. They'll run big voluntary redundancy schemes in which the best people will choose to leave because they are the ones that can see opportunities elsewhere - so the big companies will be left with the poorest performers. They will drive cost down, with a short term benefit, but a huge long term price to pay - as well as further impacting the current economic crisis. And they'll have a big payoff waiting for them if they mess up and get booted out.

So we're all relying on you - the big thinking managers in small businesses. You're the ones that actually make things, do things, and serve people.

Entrepreneurs do need to respond to the current situation, ensuring the survival of their businesses - but then they need to be quick to respond to the opportunities that present themselves in any adverse situation.

This will be the time to hire great talent at affordable rates. This will be the time to get great deals from suppliers, and on new equipment. This will be the time to get ahead of your competitors.

Over my next few blog posts I'm going to be looking at the different aspects of the threats and opportunities, what it takes to ensure a business survives - and how to find the new opportunities.

In the meantime here's a summary from the BBC of the events that led to this economic crisis.

I've been catching up on my blog reading over the weekend and here are a couple of articles I found interesting that I wanted to share:  read more »

The New Yorker: The Permission Problem

Seth Godin has a good blog post on the virtue of patience for entrepreneurs.

He's aiming it mainly at web startups - but I think it's true for anyone starting a business or launching a product - and I've mentioned it in my books many times.  read more »

Find Your Lightbulb: How to Make Millions from Apparently Impossible Ideas author: Mike Harris asin: 1906465045

Last week I had the privilege to meet an unusual entrepreneur called Mike Harris. You might not recognise his name, but you'd definitely recognise the names of some of the businesses he started: 'First Direct' and 'Egg'.  read more »

Does the UK government have a sense of humour?

As the country's economic problems begin to bite they've appointed a new member of the Financial Services Authority.

His name? Mr Pain.

Think I'm kidding? See the press release for yourself.  read more »

This is the fifth and final of the Enablers of Enterprise detailed in the report, and I believe it's the most important in unlocking the latent potential of the existing entrepreneurial businesses in the UK, let alone encouraging the growth of future firms.  read more »

For me this is the least important of the five Enablers of Enterprise identified in the white paper.  read more »

This is the fourth 'Enabler of Enterprise' identified in the UK government report on enterprise - and I think they've got this section bang on the mark. Here are the key points with my views:  read more »

• The main problem with access to finance is not any kind of lack of available finance - its a lack of 'investment readiness' in companies seeking funding.

In the white paper the government focuses on five 'enablers of enterprise' and in this post I'll summarise and analyse the section of the report on one of these: Knowledge and Skills.  read more »

This weekend I'm continuing my summary of the Government's publication "Enterprise - Unlocking the UK's Talent", which sets out it's research into enterprise in the UK, and it's plans for encouraging and supporting enterprise in the future.  read more »

Continuing my series summarising and analysing the UK government's Enterprise white paper, let's look at some of the statistics they present that give an insight into the current picture of enterprise in Britain...  read more »

Today I'm reading through the UK government's document "Enterprise - Unlocking the UK's Talent", known as the Enterprise White Paper.

Yes, maybe I need to get out more.

Anyway, I'm going to be blogging about interesting findings as I come across them.

Firstly, they are aiming to achieve:
• a greater proportion of people with the ambition to start and grow a business;  read more »

Marc Andreesson, one of the first big internet entrepreneurs (he founded Netscape), has written an insightful blog post: The Psychology of Entrepreneurial Misjudgment, part 1: Biases 1-6.  read more »

Every year, Stanford University in the USA holds an Entrepreneurship Week, and they set a challenge for students to create value from some everyday object.  read more »