 What is Emotional Intelligence?
Emotional Intelligence or EQ is the capacity to identify, understand, use, control and express your emotions in an effective and positive way. People with a high EQ have the abilities to communicate better and navigate relationships with empathy and good judgment. EQ helps reduce anxiety and stress, defuse conflicts, improve relationships, empathize with others and overcome challenges. To some, Emotional Intelligence sounds like an oxymoron. Understandably so. We tend to think of emotions and intelligence as two separate issues. But put them together as Emotional Intelligence, and it is essentially a different way to be smart. The term was made popular by psychologist Daniel Goleman in his book “Emotional Intelligence: Why It Can Matter More Than IQ.” What are the elements that shape Emotional Intelligence? Self-awareness. The ability to identify, recognize and understand your own emotions, being aware of your emotional feelings and not avoid negative emotions, such as anxiety, fear and sadness. To be conscious of your own state of mind and how it affects your thoughts, behaviors and decisions, are the keys to nurture self-awareness. Emotional control. The ability to control strong emotions by not immediately acting on first impressions and strong feelings in an impulsive or destructive manner. The ability to let displeasing feelings sink in, take a breather and take the time to decide how to alleviate or reduce negative feelings, cultivates self-confidence. Emotional control also helps to develop the ability to consider various solutions to one specific situation or problem. Not reacting solely from an emotionally charged state, results in better decision-making outcomes. Empathy. The ability to recognize how and why people feel the way they do. Showing empathy develops a deeper, more intimate relationship. Empathy allows to anticipate how your actions and behaviors influence other people as well as your own. Developing empathy skills enhances self-awareness and understanding others. Motivation. People with a high EQ tend to be highly motivated as well, which makes them more resilient and optimistic. Social skills. The ability to communicate in a clear, concise and courteous manner. Good social skills are the summation of all of the above components of EQ: self-awareness, emotional control, empathy and motivation. Emotional Intelligence improves naturally over time as we age, but only if you pay attention to its development and applications. As the years roll by, EQ will help build and sustain satisfying relationships and achieve success. Not surprisingly, the types of individuals that score the lowest in EQ are dictators, terrorists, murderers, racists, rapists, sexual predators, drug dealers, human traffickers, extortionists, racketeers, narcissists, bossy bosses and offensive people. During the COVID-19 pandemic no skill has shown to be more important than managing and applying the elements that shape Emotional Intelligence, not only on a personal level, but in your professional environment as well. People with a high EQ proved to be more resilient, relaxed and inventive during isolation or lockdown, and have shown to be more disposed to help those around them that needed help. On the Internet there are several sites with online EQ tests. Some are very basic and simple, others complex and exhaustive. Challenge yourself to determine your degree of Emotional Intelligence. Doing a test is already a learning experience. Robert Barzelay  Business has only two basic functions: marketing and innovation. Peter Drucker (1909 - 2005) You have this great, unique, innovative idea, maybe already a model or prototype, perhaps even an MVP. Or you are further, with traction: commitments, customers and first sales. You think to know what marketing is all about, but admittedly you don’t really. You read books and articles, went to seminars, who knows, you may even gotten yourself an MBA, but you figured out, theory and practice are not synonymous. You got your company in place, perhaps not (yet) with an office, but in an accelerator or incubator, or you work from home and have your meetings in coffee shops and mingle during conferences. You are self-financed, and managed to get seed money from family, friends or an amenable angel investor. You have done your homework, and got the necessary legal, financial and tax advice. You may have written an executive summary crammed with grandiose verbiage, drafted a business plan, designed a stylish website, and created a splendid investors presentation. You think you are ready. But are you really ready? Did you do your Upstream Marketing? Upstream Marketing enables you to:
What are the courses of action?
With the outcome of these steps you can eventually design and develop your product, write your business plan, and create your other presentation and marketing materials. Yes, only now! Too many startups and new product launches fail because of the lack of a solid upstream marketing assessment. Your product must be a Must-Have, not a Nice-To-have. Next is Downstream Marketing, divided into the prelaunch market development steps, the launch, and the subsequent market introduction steps. Though plentiful, I will not go into the nitty-gritty detail of downstream marketing here. There is much more in Marketing than people are aware of. Marketing is the link between your company and the market, hence the word MARKETing. Marketing starts as soon as you come up with an idea, and continues during the design, development, production, promotion and sales of your product. Marketing never ends. Marketing also includes monitoring of your product’s usage, remaining aware of competition and other external factors, customer relations, and user feedback for product improvement and innovation. Let me assist you with your Marketing. Engage me for a fixed period: a quarter, half a year, whatever it takes to work on some or all of your marketing needs. No, I am not suggesting to recruit me full-time. You need someone younger than me with a long-term objective to help put your company on the world map and become a success. What I can do, and have done so plenty of times before, is assist you with your marketing and business development, and at the same time find the right person to do this eventually full-time. I can assist with such a person’s recruitment and coaching, so he/she can be fully ready when I go on my way. Talk with me. Robert Barzelay  Why do so many people these days whine and complain that they are so “busy”? Why do these confabulators use their purported busyness as an excuse to neglect, ignore or not respond to their fellow human beings?
You would think that in these modern times, where virtually everything is automated and moving at the speed of light, there should be no likelihood of being overscheduled, overextended, overburdened or overcommitted. And yet, you get these lame grumbles of being so “super busy”, “overly busy”, “absurdly busy” or “insanely busy”. Even just saying “busy” isn’t sufficient. This might be a shock for those busy bees, but people that hide behind this facade of busyness are blatant fibbers that are either incompetent, disorganized, over the top, confused, chaotic, cuckoo, unbalanced, or all of the above in a delicate mix of mental disarray. Nobody is really interested to hear how busy you are, as if the person you are telling this to can never be as busy as you are, let alone even be busier. Going on and on in detail about your busyness is not a productive way to have a dialogue. Whining never leads anywhere. No one is going to react by saying that you really have it especially bad, that they heard dramatic stories from busy people, but that your busyness beats them all. OK, if your goal is not being pitied, then what is your goal? Excuse your incompetence to manage your time and pretend to not be chaotic? Interestingly, most people who are truly busy, with their work, family, sport, or whatever, rarely play the “too busy” card. These bustling souls tend to go out of their way to make time for a meaningful conversation exactly because they are truly busy. Performance depends on efficiency, self-control and the occasional time-out, not pretending to work 14 hours non-stop, day after day. As Henry Thoreau wrote “It is not enough to be busy. So are the ants. The question is: What are we busy about?” Even though many people want to give the impression that they are busy with loads of important and urgent work, they probably are busy writing elaborate To-do lists, daydreaming, gossiping at the water cooler, texting about nothing, spinning in the gym, chowing their fast food junk (a relaxed, sit-down meal is frowned upon by busy beavers), taking their kids to or from school or sports, watching YouTube clips of cute or grumpy cats, updating their Facebook page, trolling on Twitter, making contacts on LinkedIn, taking selfies, flipping through Instagram, playing Crazy Bird, tracing their ancestry, or getting plastered. The problem is that many think that, if they say they are busy all the time, or at least do as if they are, people will be in awe, admiring their dedication, their perpetual drive to perform and produce. The reality is that these wannabe busy bees demonstrate exactly the opposite: that they are incompetent, chaotic drama queens. Their inability to be proficient is a perfect example of the Peter Principle makeup. If you can’t think, can’t communicate, can’t listen, if you hide yourself behind a self-erected wall of busyness, if you close yourself off, ignorant of the world and people around you, you made yourself irrelevant. You will never progress. You will become a useless appendix in a world that does not know you even exist, with no future, only your self-made cocoon of that image of busyness you try to portray. I have experienced people who consistently said they would get back to me on a given date, even sent invites to my calendar with time and place to meet. Not showing up is infuriating. Canceling a day or a few hours beforehand is insulting. Worst is the ensuing busyness excuse: “Sorry we couldn’t meet. I was too busy.” Yes, sure. Just plain rude, incompetent, or both. Civility and a sense of integrity make all the difference to me. I lose respect for people whose word doesn't mean a thing. I end up feeling manipulated when someone says they are going to do something, and then don't do it. There may be a valid reason they didn't do what they said they were going to do, but if it happens over and over again under the “busy” pretext, such persons are unreliable, and my respect for them vanishes. If you want to feel respected by others, then you need to say yes when you mean yes, and no when you mean no, and not allow your fear of rejection or your fear of being controlled to get in the way of being a trustworthy person. Some people just can’t let go and get bogged down into that busy-busy-busy spiral. Afraid to come across as a person that can’t do the job or complete a specific task? Maybe you truly can’t, maybe you can. Perhaps you really have too much on your plate. So, delegate! Delegating is an art. If performed well, it can be a big relief. You can save time, efforts and money, and focus on other matters. Have someone else (that may even be better at it) take on the task. It can be a win-win situation for both sides. It is no shame to delegate, really. In fact, if you have the brains and guts to delegate, it is seen as a sign that you aim for results, and not that you are in fact trying to shelter your purported power to be in charge, at all cost. Give it a try, open up, and move out of your busyness sanctuary, wasting time on things you can’t or even don’t want to do. Delegate, and hand over urgent and important matters to a colleague or your number two. And if you don’t have any, engage an outside consultant that can do the job for you, fast and efficiently. That’s why we exist. That’s our business. Try us. You may be positively surprised. Robert Barzelay  Value Proposition – A business promise that underscores why somebody should buy a particular product, technology, process or service by convincing a prospect it will add more value or better solve a problem than what he/she uses now.
Over the years I have been involved in innovative projects with new products, new technologies, new methodologies and new services. Today I enjoy working with innovators, helping them explore their value propositions and building their businesses. Creating a meaningful value proposition is critical if you want to start the journey from idea to building and managing a successful enterprise. Value Proposition and Innovation are synonymous: “Offering something new or better, an improvement of what is available now, no matter in what form”. You cannot innovate without offering something of better value, be it in time, cost, design, energy, exertion or utilization. Simply said, a value proposition is a positioning statement that explains what benefits you provide to whom. It describes your target customers, the problems you solve, the needs you address, and why what you offer is distinctly better than alternatives. Your marketing efforts will lack persuasive substance, if you do not have a convincing value proposition, and do not know how to use it. Too many value proposition statements are vague and confusing. A value proposition is your prime tool that will explicate your competitive advantage in the form of benefits for your stakeholders, not only to your customers, but also to your employees, partners, shareholders, and to investors you want to entice. It describes in short what your strategic marketing plan describes in detail. A solid value proposition forces you to focus on all business aspects that ensure you can deliver on your promises. It helps you to avoid wasting time going after customers that will not be buying from you anyway, from wasting money designing or producing something nobody will be interested in to use or can afford to buy, and from wasting energy, time and money on marketing campaigns that will not turn into sales and profits. But first: what a value proposition is not. Not #1. A value proposition is not a nifty slogan or tagline, or some kind of vision, mission or capabilities statement. Lionized companies with renown brands and products can brand their marks and convince buyers with marketing slogans like “Just do it”, “Things go better with Coke”, “Don’t leave home without it”, “Think different”, “Got milk”, “Intel inside”, “Diamonds are forever”. But these have nothing to do with a value proposition, If you are an unknown startup, a new kid on the block, and you formulate a value proposition that does not mention what you sell and to whom, does not communicate any value, and does not show how and where you differ from what is available or done now, you will get nowhere. You will be ignored, vanish into thin air, and disappear in the annals of the irrelevant. Not #2. A value proposition is not an exhaustive list of features, defining all the attributes you have built into whatever you are offering, aspects you have spent months or years in developing, remodeling and refining. “Our iBall is the lightest, smallest, roundest, fastest, safest, most advanced, least expensive ball in the world”. Great, but what are the benefits, and who are the users? People buy benefits, not features. They want to know right away how what you are offering will benefit them. “What is in it for me?”. That is me as in ME!!! Or moi in French. Listing just a bunch of features means you leave it up to your would-be customer to come up with the benefits, if ever they want to spend their time on figuring them out. Not #3. A value proposition is not a way to show how smart, great, intelligent and skillful you are. Vanity will get you nowhere. Moreover, technotalk, acronyms, jargon and disdainful gibberish can kill any interest in you right away. How would you feel if you read this: “Our innovative systems envisioneer enterprise-wide functionalities and extend mission-critical experiences using our proprietary Wacs system to syndicate killer paradigms and protract frictionless aspects in 3-D”. A value proposition of a HiTech startup that never made it. The last thing you want to do is to make your prospects feel stupid. Using complex, tortuous terminology is the worst way to connect. A reader who does not understand at first glance what you mean will not pick up a dictionary to figure it out. Use simple, clear and straightforward language, so that a lay person can understand the message, and an expert will not ridicule you. Not #4. A value proposition is not a way to state what you offer is the best of the best. Even if you manage to communicate a value proposition packed with vital benefits, briefly describing what you offer to your target market, but you omit what sets you really apart from your competition, destroys the essence of your value proposition. An unambiguous comparison with what and whom you compete against is what will tip the scale to a sale. Why else would anybody bother to go for you and not stick to what he/she uses now, or simply ignore you? Knowing now what not to do, let’s switch to what to do. Building your value proposition. I. Prepare Start by answering some simple “why” questions: Why do you think your idea or concept is so exceptional? Is it based on your own experience with something you do or use that is missing something or is not good enough? Or did you see or read about somebody else having problems? Assuming you plan to solve a problem or improve a nagging situation, why didn’t anybody else come up with (your) idea yet? Why would anybody be interested in your concept, and why will it be a success? Once you have spelled that out, formulate the “why” in clear, understandable language. It will be the basis of your value proposition. You cannot create a value proposition without having done a detailed SWOT* analysis – and don’t forget to do a SW analysis of your main as well as upcoming competitors, not just of your own company. You cannot make a SWOT analysis without data from your Needs Research, Market & Competitive Intelligence, Proof of Concept, Proof of Market, Trials and Tests. If you don’t have your idea or concept evaluated, tried out or used, you cannot create a value proposition. * not to be hit over the head with my no-acronyms advice: SWOT means Strengths & Weaknesses (of you and your competitors) and Opportunities & Threats (in your target market). II. Define With a solid preparation and reinforced with the details and knowledge you have obtained from your target market and prospects, define the problems or pains you have observed that you think you can solve with your solution. Discuss, ask for advice, modify and reassess your solution with a selected number of prospects, and make them feel prominent being part in the development of your solution to their problems and pains. In fact, these advisors can potentially become your most loyal, long-term customers, your references and advocates, in fact your best and least expensive marketing tool, if you do it right by creating trust and building solid working relationships. Of course, this works only if you can live up to your promises. “A problem well-defined, is a problem half-solved”. Many entrepreneurs make the mistake to dive headlong into the solution before defining and understanding the problem they are planning to solve. III. Qualify If you identify the problems and pains to be obvious and/or critical, and you are convinced that your solution is THE solution, then the first thought that may come to mind is: “This is going to be an easy sell”. But beware: If a problem is so obvious, and yet critical, ask yourself (and find out from the user): “Why has this not been solved yet?” You may come to understand that a particular problem persisted because of ignorance, incompetence and/or negligence of the user. If you suddenly appear with your great solution, and you, naively maybe, point this out, heads may roll, or you can put careers and reputations at risk. Treat this situation tactfully. Also, if you uncover a problem that the user has not been aware of, you may end up in the same situation as described above. Tact here is also of essence so not to be confronted with an obstinate or suspicious prospect. Last but not least, if your solution demands more resources, changes in processes or protocols, and require in fact more work, convincing a prospect of the value of your solution will be tough. Therefore you must have a truly strong case, preferably with crystal clear financial benefits in terms of monetary savings, or savings in time and staff; yes, beware here again of objections if people fear to be dismissed if your solution is adopted. This is a tricky issue that has to be well explained and justified in your value proposition. IV. Evaluate Having defined and qualified the problem you are solving, you need to evaluate if your solution is compelling and unique. You need to evaluate your solution from two perspectives: from a skeptical user’s viewpoint, and from your & your company’s angle.
V. Measure Often overlooked aspects are the Ease of Use and Ease of Learning of your novel solution, two factors that can make or break its acceptance. By measuring the gains for the user your solution provides in terms of simplicity (Ease of Use) and understandability (Ease of Learning) versus the time, pains and costs it will take to adopt it, you can quantify the added value of your innovation. Disruptive innovation has become common parlance, but in reality people are interested in non-disruptive disruptions, where the technology with game-changing benefits is expected, even required, to be disruptive, however, its use must be non-disruptive with minimal modifications to existing processes or protocols. Ergo, disruptive innovation ought to be non-disruptive to adopt. VI. Build Having made all the preparations and precautions how to and how not to build your value proposition, get started. It is impossible to suggest content, or even templates with “fill in the gaps”. A value proposition is unique, personalized and pinpointed. Here a simple value proposition of 3M, and one I wrote: "For Professional Painters who need to paint interiors quickly without redos, the Scotch® Brand Masking Tape delivers fast work, consistency and perfect results, better than Manco and Tesa, at $xx/roll." "For interventional cardiologists who find the use of large bore catheters like the ValveCath™ and Cath85™ problematic in TAVI procedures, the DimiCath™ of CardioLark is a dual purpose, self-expanding, Fr16 catheter that reduces vascular damage and minimizes post-op bleeding with 48%, according to a randomized, double blind study on 120 patients. Using our DimiCath™, substantial savings can be made as a result of shortened OR and recovery time, negligible need for transfusions, less complications, and faster discharge of the patient." To summarize: What must a value proposition do? It must resonate You must address user and market needs and problems. These are not conceived from a dream, a fabricated story concocted behind your desk or whilst driving, a bunch of Googled articles, or suggested by some hired guru. No, they must come directly from your eventual user, your future customer. They are the only ones that know what they need and want, what their problems and pains are. You have to get their insights before you can start even to think about your value proposition. The promises in your value proposition have to resonate with your users, so that they can instantly recognize that your solution solves their problems and pains, that it is what they need and want. It must differentiate Your future clients must immediately understand why and how your solution is so much better than what they use now, but also compared to what is trending and other innovative options about to be introduced. You have to stand out. You have to differentiate. But beware, do not overdo it with too many random benefits. Pick two, max. four, that relate directly to the users’ needs or problems. It must substantiate Your claims mean nothing unless you can prove them. Provide evidence. Refer to an independent study or survey with hard data. Let your prospects find out themselves by testing it or having hands-on experience. Does it do what you claim it will do? Will it deliver those outstanding benefits you claim? Even if your prospects want to buy (you resonate) and perceive you to be the only one on the universe that can deliver the benefits they need and want (you differentiate), if you cannot substantiate your claims, they will not believe you and will therefore not buy from you. Conclusion A value proposition is the clear articulation of what it is that you want your customers, employees, partners and shareholders to know about you. It is the encapsulation of your product or business, starting with why you are doing it. If your value proposition is not clear, your audience will not give you their attention. They simply will not care, and ultimately will not use or buy whatever you are offering. More than 2,300 words to explain what a value proposition is may seem an overkill, but bear in mind that this seemingly short statement is in fact the core of both your innovative product and your business: you cannot do without it. If this hefty narrative dazzles or despairs you, contact me and let me assist you writing a robust value proposition. Robert Barzelay  Don’t read this if you know everything and are 100% sure the whole world is waiting for your great idea. However, if you have the tenacity to learn, read on. Especially if you are about to develop an innovative product from your concocted, ingenious idea and think of building your own startup.
The moment you get an idea for a great product, your upstream marketing should kick in. Correct. Marketing is not just advertising, making a fancy website or flashy brochure. Marketing is you’re here-and-now and the key to your future. If you plan to have a future, and not just want to make a quick sale of your nifty idea to an imagined big buyer with a fat wallet, read on. What is upstream marketing, and why bother with marketing so soon? If you pose yourself this question, it shows you are curious and want to learn. That means you are on the right track. You’d be surprised how many I-know-it-alls maintain they really do know it all and are on that seductive road to riches with an arrogant show-me-the-money attitude. Too many with (possibly) great ideas that are haughtily, yet so ignorantly jumping on that sinking ship to failure. I vividly remember a CEO/CTO/CSO (yes, he was inventor, founder, and sole Chief), who failed with 3 startups, but maintained: “I don’t need marketing, I need sales”. He never had any sales. Brainstorming and coming up with ideas do not drive innovation. Ideas don’t lead to innovation success. The success of an innovative product is determined by your users, your clients. If they are ready for change, they are driven by their needs and wants, as well as by their wallets. If you can develop a solution to a problem that delivers more benefits than existing alternatives, then you are on the road to success. Innovation comes from connecting with customers in meaningful ways, and this requires that you develop a unique, valuable customer insight before you should even begin generating ideas and developing that innovative product. Some people are scared of innovation, of the new, the untested. So be prepared for the old adage: “Why change? I have always done it this way”. First of all consider this. It is very likely that one or more people somewhere in the world, or just around the corner, came up with the same idea like you. So speed is of essence. A worse scenario is that somebody was faster than you, and already has made a product out of the same idea you thought you so uniquely came up with. Imagine that product is already selling like crazy, without you being aware. That would hurt, right? Upstream Marketing starts with Market & Needs Research. This doesn’t mean staying where you are and Google around the Internet. You can try, but chances are pretty big you miss the important going-ons. Another option is buying one of those voluminous, pricy market research reports, for which offers probably fill your spam mailbox to capacity. May be useful for multinational corporations with immense revenues, but not recommended for startups, unless you insist to compete head-on with a Fortune 500 company. Research demands that you get away from your desk, out of your comfort zone. Go outside, and physically visit your market. I don’t mean the fruits and vegetables market, but the market where (you think) your kind of product will be (or is already) used. Yes, this is where the word “Marketing” comes from “The Market”. And you will have to live with Marketing from start till sales, and beyond. Your Market Research should answer the who, what and where the future users of your innovative product are. Figure out who else is selling the same (kind of) product, for how much, for how long, and how successfully. Even if there is no competing product, there is always something (a procedure, a method) that does what needs to be done. Unless you have something truly unique. Even then you still have to figure out what is happening in your market right now, especially if your innovation is genuinely a first of a kind. And whilst you are roaming the markets, snoop around if there is something new about to appear on the market that could compete with your product, or craftier even, that could be something you should incorporate in your own product too. The second research part is Needs Research. Because you will be selling benefits for the user (I assume you are aware that you don’t sell features, the big mistake of product developers), find out if your planned product will have one or more benefits. These are not just economical benefits, but can also be environmental, functional or social benefits. Is your product a nice-to-have or a must-have? Needs Research means talking with prospects, asking questions, listening, observing how they use or do what they are doing now, and what they think about it. Problems not only regard the use of a product, but also affordability, efficacy, ease of use, reliability, availability, serviceability, maintenance, and so much more. Rule of thumb: if your benefit solves a certain problem or pain the user has now, doing or using what they have today, you are on the right track. Then pose the big “What if” question. Ask these people willing to talk with you: “What if I can deliver a product that solves (this or that) problem, would you use it?” This information is crucial for you to make a product that fulfills the user’s needs and wants. This is what is called “Branding”, promising an improvement or solution, and eventually keeping your promise. No, branding is not a logo, corporate colors or a brand name: those determine your brand, the way to identify your company or product. Branding means delivering on your promise. Meeting future users offer you other opportunities: establishing long-term relationships, in other words, creating your first loyal customers for years to come. Down the road when you are selling you should know that obtaining a new customer is about 5x costlier than maintaining an existing, loyal customer. You can even go a step further beyond using them as a sounding board. You can select your “favorites” as advisor for the further development of your product, or trialist of your first functioning prototype. Eventually, appoint one as member on your Board of Directors or Board of Advisors. Loyal customers are your best and least expensive marketing tool for the future. Whilst you are getting a better understanding of the feasibility of your product, you should also perform a patent search, making sure that your idea will not infringe on existing patents, as well as investigating whether your product, with certain modifications, could pass this possible infringement test. Moreover, this is the time to consider whether it is worthwhile to patent your idea or product at all, or keep it under guard as a trade secret. Another important issue that must be investigated now is whether your product will pass the litmus test of regulatory regulations and requirements. This is more applicable for products used in the medical field, food & beverages, and any other products where safety and security are of concern. Better find out early than finding out too late after having spent lots of time and money on an idea or building a product that will never receive approval, or that would take years and years to receive approval, which is mainly the case for medical products. With the obtained knowledge and insights, you have to decide how to position your product and develop your strategic plan, outlining to which types of users and in which markets and countries you will market, how you plan to overcome customer reluctance and objections, how to counter current and would-be competition. This is the time and moment to tackle the financials. How much will it cost, in terms of money, manpower, materials and time:
How much money do you need now, and the next rounds? When will you break even? What is the ROI (Return on Investment) for the shareholders/investors? Other important issues to evaluate at this stage are the profitability, sustainability and scalability of your product. These are important matters that have to be affirmative, otherwise don’t bother to continue building a product that is bound to fail, or go back to the drawing board and reassess your whole plan. Yes, this may sound like lots of work and lots of expenses, but rest assured, if you don’t go through all these steps, don’t expect potential investors, partners or collaborators to place trust in you. Nobody is interested in spending time and money on a project that does not resonate with future buyers and users, does not differentiate from what is on the market already, and cannot be substantiated with solid evidence of the benefits it offers. Right: this is the description of a Value Proposition, which can be written only after having gone through all of the above. Read more here: http://bit.ly/1NceRlg Did you realize that at this stage, and after so much work, you still have not built your final product? You’ll be amazed how many startups try to push sales without knowing barely anything of their target markets and possible users, and then feign surprise that they are going belly up. Marketing requires time, efforts, expertise and money. If you cannot do these research and intelligence steps yourself, you need outside assistance from people that do have the experience and expertise. Ask me. Robert Barzelay  (Too many) founders of startups and CEOs of emerging companies have little or no understanding of what it takes to set up a distribution network. This article is focused on Life Sciences companies, but much of this can apply to other industries.
Establishing a Distribution Network is an Art, a combination of building trust, being transparent, and enticing a potential distributor to become part of your Team. Distributors are to be treated as the extension of your company, the link between you and the ultimate end-user of your product, the client. If you think your distributor is your client that just buys your product for a premium price, and then the hell with him, stop reading right now, and consider closing shop. Unless you are affluent enough to set up your own subsidiary companies, then, of course, you don’t need distributors, and won’t be reading this anyway. Before going through the steps of “How to Establish a Distribution Network”, it is imperative to realize that with just a product that seems to work, the chance of finding a distributor willing to be a guinea pig for your marketing efforts is remote. You, your company and your product have to be ready to entice a distributor, to interest them to invest in the launch of your product, to allocate time and people to assist you with a successful launch, and eventual sales of your product in his country. Distributors are not sitting by the sidelines waiting for you to come along with your formidable product you consider the biggest invention since sliced bread. Real successful distributors (the kind you want) are busy marketing, selling, supporting their clients, and making money. It is your task to convince them they can even be more successful if they take on your product. If you don’t have one or more of the following essentials yet, it will be a tenuous endeavor to find and engage distributors for the launch of your product in their country. Expect that very few distributors are willing to stick out their necks, take financial risks and put their reputation on the line for an incomplete product offering, no matter how exciting and promising. Besides, the less you have of the following essentials, the more your launch will cost and the longer turning a profit will take. It is up to you to decide when the time is ripe to enter a (new) market, and where. Essentials distributors will expect:
What dissuades most distributors are manufacturers that have no user references, no regulatory approval, no reimbursement, and no sales in their home country. An often heard excuse is “Our home market is too small”. Well, even the better: it should make it easier to align with the best KOLs in your backyard to get rapid and direct input during your product’s development, and ultimately product acceptance and sales. If you think you are ready to explore the world and start searching for your ideal distributor, these are the steps it takes. And if this looks like “Mission Impossible” for you, engage an experienced expert to do this for you. Where to start? Based on your market & competitive intelligence, the O(pportunities) and T(hreats) of your SWOT analysis, your budget and your launch plan, decide on where to start. It may be tempting to venture into the world’s top countries in terms of market potentials, like the USA and China, but going big means spending big. Unless you are flush with cash and manpower, start in the smaller and more manageable countries. For example, in Europe start in the Netherlands or one of the Scandinavian countries, for Asia a good start is Singapore, and start in Canada before tackling the USA. (A) FIND How to find potential distributors (in order of the most till least effective method). 1) Own network The most effective way is contacting ex-colleagues, former clients, friends and your LinkedIn contacts, and ask for their suggestions and recommendations. Pro: Saves time and money. Familiarity with referring companies/people. Con: None really. 2) Medical conferences and exhibitions Attend conferences in the countries you target. Pro: Best venue for market & competitive intelligence and to find distributors. Attend presentations. Explore posters. Interview KOLs and potential customers. Visit the exhibits and attend conference events to find out from (competing and non-competing) companies about their own distribution network. Possibly, find and meet with the kind of distributor you are looking for. All in one location, usually taking 2-3 days. Con: Could be costly – travel, accommodation and conference registration. 3) KOLs and (future) customers Call on KOLs and potential customers. You have to visit them anyway for your needs research, market & competitive intelligence, clinical trials, user feedback, and so on. Pro: Ask them whom they can recommend as distributor, who gives the best customer service, who has the best reputation. Con: Time-consuming and costly, but worth every cent and minute. 4) LinkedIn Pro: Focused searches for the type of distributor you need. Look into their company page, their executives’ profiles, the posts they have published, their contact lists and group associations. Read their recommendations. Eventually, try to connect. Con: Not all potential distributors may be found because of LinkedIn’s limitations to do focused searches, or simply because not all are on LinkedIn. No certainty that a connect request will be granted. 5) Your own website and social media Post that you are in search of distributors in specific countries. Pro: The word is out. Con: Response rate can be quite low. Requires hiring online marketing expertise. 6) Commercial or trade attachés at your country’s foreign embassies. Pro: Dedicated, supportive, driven by national interests for export from your home country. Con: Can take time to get results. 7) Export Institutes and government branches in your country. Pro: Databases of foreign companies that registered or visited on trade missions. Liaison with commercial or trade attachés abroad. Con: Databases can be incomplete and not well-categorized. 8) Chambers of commerce Pro: All registered companies are listed. Con: Most charge for their services. Operate regionally, not nationally. Not all registered companies clearly indicate their capabilities and specialties. 9) Yellow Pages online Pro: Generic lists of companies in broad categories. Con: Only listed companies with paid ads provide information about what they do. Yellow Pages are out of fashion, so many companies are not listed. Time-consuming. 10) Web searches, e.g., Google Pro: Convenient. Easy to use. Con: Too many hits, running in the millions. Most results irrelevant due to inferior SEO, priority given to paid advertisers, and use of imprecise keywords. An enormous job to find what is needed. Time-consuming 11) Commercial database companies Pro: More focused searches possible than with Google. Con: Paid services. Purchased results can be too generic, not always relevant, and often not much better than an own, well-targeted Internet search. 12) Online matchmaking platforms AngelList, Sunn4i, Novertur, and others Pro: Database of companies (mostly startups) that are looking for something. Con: Full use requires subscription/membership. Platforms are dedicated to companies looking for investors, partners, etc. Rarely used by distributors promoting themselves. (B) SELECT Start the selection process by visiting the websites of the obtained companies and exclude those that do not fit your needs and requirements. If your distributor list is based on web searches, yellow pages or obtained databases, this selection process could be an arduous undertaking. Another manner to select your ideal distributor is to find out if they are active on social media. Companies that are active online use social media, like FaceBook, Google+ and Twitter, for 2 purposes: to promote themselves and to receive user/customer feedback. Other sources to check out a potential (online active) distributor is to read their blogs, listen to their podcasts, participate in their webinars, and watch their YouTube and Vimeo clips. But beware that companies can paint a rosy picture of their capabilities and products on their website and social media. Even customer posts on FaceBook and Twitter can, if negative, be removed by the company. Few distributors have an online presence in social media, with the exception of LinkedIn. (C) CONTACT The aim is to obtain the names of the right person to contact, their email address and direct or mobile phone numbers. This should be a breeze if the company comes recommended or referred to you. On the other hand, if you have to rely on information from a company’s website, a central company phone number or an info@company.com email address, finding and reaching the right person can be difficult. Many companies don’t respond to emails sent to their info@ address, or they don’t see your email because it disappears in a spam folder. Definitely do not send out mass emailings; not only will it not give any useful results, it may damage your reputation when you eventually manage to contact the right people. Perseverance and repeating the steps under (A) Find may be the only way to get what you want. (D) COMMUNICATE What do you communicate to your prospects at this stage? Unless you already met the right person at a conference, you now need to introduce yourself and at the same time find out more about your potential distributor. Your introduction must be concise and to the point. Never attach lengthy company profiles or executive summaries, or overlong slide presentations. Your message should describe who you are, how long you are in business, what your product is, its stage of development, regulatory and reimbursement details, and where it sells already. Write what you need in the distributor’s country and what you expect from your distributor. Prior to the next step both parties need to understand and be convinced what the benefits for each side will be in case a business relationship is established. You have to assess the details you received from the potential distributor, and your distributor needs to know the general terms of your distribution agreement, business model and marketing plan for his territory. (E) MEET If there is mutual interest, it is time to meet face to face. But where? In the distributor’s office or yours? I usually use the following rule of thumb: if you contacted the distributor, you travel to him, but if the distributor contacted you, let him come to you. Each alternative has its advantages. Traveling to the distributor enables you to see his premises, meet his team, and visit their customers. You can demonstrate your product and discuss business matters. It gives the chance to your distributor to sell himself as your best choice. Being in that country also gives you an opportunity to visit more than one potential distributor. This scenario I have experienced most commonly. Sometimes a potential distributor prefers to visit your company, especially if you have your own R&D and/or production facilities. No matter who visits whom first, the purpose is to get to know each other and work on building a business relationship. (F) EVALUATE At this stage both sides will have to evaluate whether a business relationship will be beneficial. You will have to decide if this is the right distributor, and the distributor will have to decide if you are the right company whose product he wants to distribute. Both sides have to asses if it is worth the investments and efforts needed to become successful and make a profit. Once you are confident that this can be your right partner, as a last checkpoint, define your expectations, and see if your candidate distributor can agree. For example: sign distribution agreement in 2 months, launch product in 4 months, obtain 5 customers in 8 months and sell $2 million to 25 customers in 2 years which will be 10% of your company’s forecasted global sales in 2 years. Looks simple, but this is often overlooked. (G) NEGOTIATE DISTRIBUTION TERMS AND CONDITIONS Agree on who pays for what. Who is responsible for local regulatory and reimbursement matters, clinical trials, demonstrations. Details about payment terms, ordering procedures, deliveries, storage conditions, product installations, technical service and maintenance, sales training, customer training, samples, conferences and exhibitions, customer support, warranties, MarCom, and more. Last but not least, the distribution agreement: short, to the point, relevant, and transparent so that there can be no misunderstandings. I have seen convoluted 75-page cutthroat agreements that were one-sided in favor of the manufacturer only, and subsequently killed months of preparatory work and negotiations. Exclusivity A fresh partnership between distributor and manufacturer is born in a period of bright optimism. By aligning with a new distributor, a manufacturer should refrain from signing an alternative distributor, just like it is expected from the distributor not to represent a competing manufacturer or supplier. No distributor will spend time, efforts and money on the launch of a new product, if he is not offered exclusivity from day one, knowing that others will be in competition. No one will visit KOLs and potential clients only to hear that another company already presented the same product from the same manufacturer. Unless it’s a me-too product that is sold by catalogue via the Internet, no distributor with a trained staff, a dedicated field force, and a reputation to live by, will accept anything less than exclusivity. Territory When aligning with a new distributor, it is important to assign a territory that is not too large initially. Start small, start local, start where the distributor has a proven track record. It is not prudent to assign a large territory (like several European countries at once, or the whole of the USA or China), and hope for the best. Expand the territory gradually, after results in the smaller territory suggest that an expanded geography is judicious. Minimum order obligations No distributor will accept minimum purchase obligations right from the start. Launching a product in a new market and country is a team undertaking by the distributor and the manufacturer. Both parties should have the same goals: to have a positive impact on a patient’s well-being, to offer the user clear-cut benefits, to sell as much as possible for the most profit possible to as many clients possible, and to do so in an ethical manner. Sales forecasts are of course necessary for planning purposes by both parties, but stranglehold purchase obligations date back to yesteryear’s practices. Termination for convenience Setting the term of validity of the agreement to one or two years with automatic renewal is a routine procedure. This way either party can submit a notice of intention to not renew with (e.g.) 90 days prior to the end of the term. When the convenience clause is invoked, cause and responsibility for cause need not be argued. More important, the distributor agreement does not end in a legal skirmish, consuming management time, corporate focus and financial resources on attorneys, courts and arbitration. Performance, and not a wordy agreement, should be the binding force in a manufacturer-distributor partnership, where both sides are driven by successful results. Termination for cause This is the usual legalese that includes agreement breaches, bankruptcy, insolvency, fraud, etc. that need no deliberation here. Post-termination A reliable distribution agreement should clearly state the responsibilities and obligations of both parties during the life of the agreement, upon notice of termination, but also after the agreement is terminated. There are matters that need to be finalized, such as payments, return of product and company materials, taking over pending orders and deliveries, maintenance agreements with clients or end-users, etc. What is often overlooked is compensation for the distributor in case of an acquisition or merger of your company, or when you see the time is ripe to start selling directly or setting up your own local subsidiary company in the country in question. Compensation can include continuing (and paying for) the use of some of the distributor’s staff that handled your product, or have the distributor continue with local product handling, like logistics, warehousing, technical service, etc. In case of a complete discontinuation of the working relationship, you should agree on a way to compensate a distributor for the investments he has made for the launch of your product, especially when a distributor has performed to your satisfaction and plan, it is only logical to compensate him as he will not see the returns on his investment. In general, a distributor that is underperforming will be terminated for non-performance, yet a distributor that has been performing or even doing better than expected, risks of losing his distributorship because the manufacturer wants to go direct. Distributors always have to play a balancing act between being good or too good. (H) SIGN & START The moment of truth. Both your distributor and your company have taken the important step to launch your product based on mutually agreed sales objectives and marketing strategies. Now is the time and moment that both parties put in action what has been discussed and agreed upon. Distributors are becoming scarce. First of all because more and more manufacturers prefer to set up their own subsidiary companies, even in the smaller countries. Secondly, because buyers prefer to deal with less suppliers for two main reasons: price discounts as a result of economies of scale, and the advantages of dealing with a single source. Finding and working with distributors should be based on complete transparency and mutual trust. What is good for you is good for the distributor, and vice versa. I have established distribution networks on all continents, as CEO and VP International Business Development & Marketing of large corporations, mid-sized companies and startups, and have been a distributor myself for five years. I can humbly state that I know what it takes to work with a distributor and to be one. Your company’s mission should be to sell benefits to ALL of your stakeholders, and the distributor should be one of them. If it is not, make it one. Robert Barzelay  There are two kinds of people in business: those that have and those that do not have the entrepreneurship DNA. Test yourself to figure out if you fit to be an entrepreneur.
Can you sacrifice? This is the foremost important issue: can you drop all and (almost) everything you do right now, from your current job to family and social life, and dedicate, truly dedicate your money, blood, sweat, tears and time 24/7 to your startup? If not, don’t bother reading on and stay put, doing what you do or trying to do now. Without 100% commitment, your startup will never materialize. If you have a great idea, just sell it to the highest bidder. But if you want to build a real business, create something innovative, get funded, recruit & manage people, survive success or failure, do good & be good, make potentially lots of money, and have fun doing so, read on. Note that “drop everything” does not mean you should leave your partner. To the contrary, you should convince your partner to think along, help and support you. But there is a cost for your partner as well: you will not be around as often as you are maybe today. Are you absolutely great at what you do? There is no room for mediocrity when establishing a startup. Excellence, Expertise and Experience. If you don’t have all three of these traits yourself, don’t despair: find the right business partner who does. But expect to let go of your supposedly guarded ownership of your startup. Are you a people’s person? A high IQ is fine, but a high EQ is what an entrepreneur really should have. It’s all about people, about building and maintaining relationships. It’s not about being smart, waving university degrees, or boasting about insanely fantastic accomplishments. Arrogance is a killer. Rewards and diplomas do not count. It’s all about YOU as a person: who you are, what you are, what you have done, whom you have worked with, who have worked for you, but foremost, what you can do. If you don’t have high standards and if you think telling stories to impress are important, you will not add value, and you and your startup will not last, let alone start up. Entrepreneurship is about emotions, your drive, enthusiasm, perseverance, reactiveness, dialogue, trust and, last but not least, reliability. Are you excited, REALLY excited about growing your own business? In established businesses, you usually have a job with job description and specific tasks, where you just do your work and go home. But successful startups are made up of people who think and act like true entrepreneurs. Who feel personally invested in their own company’s success. Can you wear different hats? Startups usually start up with a handful of people. Some are even a one-man show at the onset. Everyone has to multitask, pick up different kinds of tasks without complaint, or being asked to do so. Often there is nobody to ask “do this for me” anyway. So, if your motto is “that’s not my job” instead of “whatever it takes”, then a startup is not for you. Are you flexible and able to shift gears quickly? A new company trying to find its niche has to move fast. What you’re working on today might change tomorrow. When that happens, not only you, but your whole team (if you already have one) need to be able to follow new avenues and strategies without losing momentum or getting ruffled. Can you work fast? Timing is everything when you get a company going, and entrepreneurs understand that. They must turn work and solutions around as quickly as possible. They are also great time managers that produce more than the average person. Time is of essence, and being on time even more so. Nobody is waiting for your idea. You constantly have to entice, create awareness, and make noise. Nowadays with the Internet it’s easier - and faster - than in the old days with snail mailings, press releases and advertisements. You must be capable to improvise, respond immediately. Long meetings and extensive planning are out of the question. Are you willing to work long hours? With a lean team and short deadlines, you’ll work long hours and weekends to get a company off the ground. Forget about vacations. Then there are the bouts of manic perfectionism that will leave you unable to turn your brain off to sleep. If all this is not possible for you, then don’t even think about starting a startup. Are you drama-free? Office politics, grapevine gossip and personal drama are toxic in a new company, well, actually in any company. Can you leave your ego at the door and focus on what’s important rather than getting sidetracked with what’s not? Can you stretch your finances? In the beginning you have to work with a tight budget, with your own money, from your savings, selling your car, getting a second mortgage, bank overdrafts, credit card loans, and friendly money from family, friends and fools. So you need to find ways to get things done on the cheap. Getting the most bang for your buck is a hallmark of startup success. Most importantly: do NOT get money from unfamiliar small investors, because you will run the risk losing most of your company if you give away equity for a small amount now in order to get you to the next month. Stretch it till you almost burst. Can you get ready? Most of your first money has to be spent on getting ready. This may shock you if you are a first-time entrepreneur, but getting ready does NOT mean getting your product ready, yet. BEFORE going from idea and sketches to a product (prototype) you need to know if there is a real need for your product. People buy benefits, not stories or features. You must figure out if you are going to sell a must-have, not a nice-to-have. Unless you want to flood the market with cheap the-same-of-the-same by undercutting prices Made-in-China style, and wiping out competition, which doesn’t require true entrepreneurship. You have to ascertain many aspects:
This whole “getting ready” segment is called Upstream Marketing. A topic on its own, too much to squeeze into this blog. Can you let go of your pride and get outside help? So ask yourself if you and your business partners have the capabilities, expertise and experience to get ready. Be frank and open to yourself. If not, find outside help, but be prepared that this will cost you. As Oscar Wilde said: “Experience is one thing you cannot get for nothing”. Professional help costs money. The myth that professionals work on a success fee (that strange phenomenon from the ambulance chasing attorneys world) or for (yet worthless) equity is a true fable. YOU are the one that is responsible for YOUR success, not the people you may engage to get you ready. Getting ready means determining the strengths and weaknesses of your product and company, as well of your competition. You must be familiar with the market opportunities and threats. You must have your sales objectives and marketing strategies ready. You must know how much everything will cost: production, R&D, purchasing & inventories, marketing, legal, regulatory, accounting, FTEs, distribution, logistics, and so much more. How and when will you make a profit? Some investors demand a full-fledged business plan, others prefer answers to their questions – which oftentimes one would find in a business plan. It may sound old-fashioned and stuffy, and sure, many investors don’t even read it. In essence a business plan is for yourself, your business bible, your road map, continuously updated as time goes by and your company progresses. No matter what, you need to convince an investor to give you money for you to achieve your dreams. You need a professional presentation to attract attention, entice and convince those investors to spend a few minutes listening to you. Then you must be able to submit yourself to an avalanche of questions, comments and criticism. If you cannot get ready, you might as well give up and continue doing what you did before you came to this bright idea setting up your own company. Nobody will spend time and efforts, let alone money, on something unclear, incomplete, unproven and not validated. Can you negotiate a big investment? Imagine you passed the tests, questioning, interrogations, and physical torture. Do you have it in you to negotiate with the big boys and girls from the financial world? Be scared, because they are vultures and can be scrupulous. They may smile, and the cookies may be appetizing, but the road towards money will be rough and full of obstacles. The checklist what to and how to is long and elaborate. But falling back on character, you should not succumb to pressure. One aspect where you can show your strength is to discuss your terms, fervently and convincingly. Keeping as much equity as possible in your own startup should be your ultimate goal, but another issue is your and your team’s salaries. Sure, don’t expect to have top salaries from the day you are funded, but on the other hand you must negotiate a worthy salary, and offer deferred payment of 40-50% of that until the company gets traction, meaning revenues. Without you and your team there is no product, no innovation, to make your startup a success. Just as experience costs money, so do the people that are experienced in the product and technology. Another important aspect is that investors want to see you believe in yourself, in your own worth. They don’t expect to fund a startup, pay all its bills, and not pay market value for the people that have to make it happen: YOU and your business partners. The way you negotiate your salary is a clear sign for investors how tough you will be when marketing your product. Are you up to this? Will you fall for the equity trap? Do not accept the story that, since you have equity in your startup (of course you do: you started with 100%), you should not get paid a salary based on your expertise and experience. The chances that you will become multimillionaire from a huge exit are very remote. According to a 2012 McKinsey report, 0.2% of startup founders in the USA made more than one million from an exit. Sure, you as founder should be able to keep equity in your own company, as much as you can. It’s your right. But equity does not pay your bills. Be clear: if an investor claims that without their money you have no chance for success, counter by saying that without a motivated and not-impoverished you, there will be no chance for the company to become successful. If investors are prepared to pay all bills, they should be aware that this regards your bill, i.e. your salary, as well. In spite of the pace, do you also have the patience? There will be awesome highs and soul crushing lows. It will be an emotional roller coaster. As Lao-Tzu said: “Do you have the patience to wait until the mud settles, and the water is clear? Can you remain unmoving until the right action arises by itself?” Bottom line Setting up or working for a startup is not for everyone. But if you think it’s right for you, if you can respond positively to the above, it could be one of the most rewarding experiences in your life. Creating and building your own company can be very satisfying. And, if you get really lucky, the equity you have managed to keep might even pay off and give you a gratifying reward for all your input. Choose your business partners wisely. Choose your employees wisely. Choose your advisors wisely. Choose your investors wisely. You are going to be in the trenches with these souls for the next 3 or more years. You will see them more than your family and friends, and you want to be pretty sure that you aren’t surrounded by idiots and greedy bastards. Trust me: been there, done that. Robert Barzelay  Some time ago I was approached by a start-up to assist the company bringing their innovative product to the market. A very interesting concept from the first looks of it. One founder, a practicing cardiologist (impressive CV with many publications, articles and books to his name) had appointed himself as the CEO, and the other founder, an ex-Army buddy (engineer with 3 PhD’s, working for a major Hi-Tech company) the CTO. They had developed a new technology that would resolve several problems in interventional cardiology. A creation out of practical experience. They were housed in a small, but well-equipped and furnished office. Angel investors, family and friends put up $3 million to build a prototype, apply for a patent, do tests and trials, hire business advice and obtain market feedback.
The CEO and CTO did R&D in their “spare time.” Production was outsourced to another ex-Army buddy running a production plant in China. Two young family members, fresh from university with a few stints as interns, were hired as VP Business Development and VP Marketing & Sales. A total of $120,000 was spent on off-the-shelf market research reports, and the 2 VPs started working on a Business Plan, using a cheap $19.99 template from the Internet. A neighbor’s kid put an investor PowerPoint presentation together. The two VPs and CEO explored the world, visiting medical conferences and academics (acquaintances of the CEO), who were asked for their opinions and advice about the new product. Some Profs were signed on the Board of Advisors (with nice perks), and a few other friends on the Board of Directors. China was visited twice “to look at the facilities.” An odd 20 VCs were approached, without much response. During the first months well over $1 million was spent, and the company’s burning rate when I was approached stood at $110,000 per month. Salaries, cars, travels, office, supplies, inventory, and outside patent attorneys and an accountant. A quick clinical trial was done by one of the CEO’s university mates, and a case study, authored by his friend, the CEO and CTO, was published in a medical journal. For the angels and uncles it had been 3-4 years, and they started to demand revenues (sales!), clearly a sign they had no clue what they had gotten themselves into. The start-up needed help. And more money. Badly. And fast. I was given a presentation about the greatness of the company, its team and the product, plus messy, complex spreadsheets with huge revenue figures, profits and market shares. Features and claims, but no benefits and no substantiation. No plans, no strategies. Only a goal to attain a “conservative and realistic” 5% market share of a $13 billion global market in 5 years. No facts, no tactics. The Business Plan was overly generic without any real content. Clearly a waste and embarrassment. They asked me to:
I ignored their unrealistic expectations, and prepared a detailed proposal, formulating what this company needs to do in order to become attractive for an investor and successful as a profitable company. Of course, as any professional and sane thinking businessmen, we quoted our price: a complete project price payable in monthly installments + a percentage of funds from investors introduced by us. Their reaction was a (feigned) shock. “Why ask for money? Can’t you do it for free? We will give you an attractive profit share from our sales to distributors.” — When? Three, maybe five years down the road? Who guarantees any sale will be made? If ever. And how manipulative is a “profit share”, especially if there’s no control over any bookkeeping? My answer was, of course: “No. I will not. Only slaves work for free, because they have no choice.” I quoted Oscar Wilde “Experience is one thing you cannot get for nothing.” Which upset the CEO. I thought, to make it even clearer, I quoted Confucius “A fool despises good counsel, but a wise man takes it to heart.” This was not the first time I encountered this kind of unprofessionalism. I had enough of being taken for a ride. “There is no such thing as a free lunch,” said Milton Friedman. I heard through the grapevine that this start-up did find a few machers who claimed to know the world and would work for free, demanding 10% of sales to any distributor they would recommend. The company ended up with long lists of names, copied from the Yellow Pages and Chambers of Commerce, plus a stranglehold contract enforcing this 10% commission if any of these companies would enter into a business deal. Nothing else. No work. No evaluations. No recommendations. Nothing. Back to Start. I met the CEO recently at a meeting. Friendly, but his body language clearly showed a defeatist state of mind. Last month the start-up went belly up and the founders sold their IP for $100,000 to a German VC. End story. This is just one example. Some inventors think so highly of themselves and their innovation, but have no idea how to introduce a new product and to set up and run a business. They refuse to “let go” of their ownership in their company and rather have 50% of nothing than 5% of real worth. They waste money on themselves, family and friends, and expect client-users to buy blindly, based on the color of their eyes and their perceived stature. They think distributors would drop all and everything so they can devote their staff, time and money on an unknown, unproven new product. And, last but not least, they refuse to pay for honest work by experienced business consultants they need. Is it because they feel embarrassed they can’t do the job themselves? Is it that they don’t want to pay outside consultants (though they pay for attorneys and accountants)? Or does arrogance play a role? I discovered that oftentimes it’s a combination of all three. I have encountered plenty more disasters. Luckily enough there are also success stories. Robert Barzelay |
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