6 SECRETS TO STARTUP SUCCESS How to Turn Your Entrepreneurial Passion into a Thriving Business JOHN BRADBERRY Foreword by Pamela Slim, author of Escape from Cubicle Nation AMERICAN MANAGEMENT ASSOCIATION New York •Atlanta •Brussels •Chicago •Mexico City •San Francisco Shanghai •Tokyo •Toronto •Washington, D.C. AmericanManagementAssociation•www.amanet.org Bulk discounts available. For details visit: www.amacombooks.org/go/specialsales Or contact special sales: Phone: 800-250-5308 E-mail: [email protected] View all the AMACOM titles at: www.amacombooks.org This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. LibraryofCongressCataloging-in-PublicationData Bradberry, John, 1961– 6 secrets to startup success : how to turn your entrepreneurial passion into a thriving business / John Bradberry ; foreword by Pamela Slim. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-8144-1606-8 (hardcover) ISBN-10: 0-8144-1606-3 (hardcover) 1. New business enterprises—Management. 2. Entrepreneurship. 3. Success in business. I. Title. II. Title: Six secrets to startup success. HD62.5.B723 2011 658.1'1—dc22 2010039039 © 2011 John G. Bradberry All rights reserved. Printed in the United States of America. 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Printing Number 10 9 8 7 6 5 4 3 2 1 AmericanManagementAssociation•www.amanet.org CONTENTS Foreword by Pamela Slim v Acknowledgments vii Introduction xi PART I Entrepreneurial Passion: A Double-Edged Sword Chapter 1: True Believers: Why Founders Fall in Love with Their Ideas 3 The Sparks of Entrepreneurial Ambition Fanning the Flames of Commitment If You Build It, Will They Come? Chapter 2: The Passion Trap: How Attachment to Your Idea Can Sabotage Your Startup 23 What Is the Passion Trap? The Damage Done: Six Negative Impacts of Entrepreneurial Passion The Core Pattern: How the Passion Trap Works Icarus Qualities: Who Is Most Vulnerable to the Passion Trap? Early Warning Signs: Are You in Danger of Being Trapped? Moving Forward: Six Principles for Making the Most of Entrepreneurial Passion PART II Your Foundation: Six Principles for Launching a Can’t-Miss Startup Chapter 3: Founder Readiness: How to Prepare for the Entrepreneurial Journey 51 The Fundamentals of Founder Readiness Purifying Your Entrepreneurial Passion AmericanManagementAssociation•www.amanet.org iv Contents Chapter 4: The Pull of the Market: Attach to Your Customer, Not to Your Idea 81 Developing a Strong Market Orientation Antidote to the Passion Trap: Give Your Idea a Market Scrub Chapter 5: Your Math Story: Charting a Path to Breakeven and Beyond 103 Planning Is Clear Thinking Constructing a Compelling Math Story Securing the Right Funding Chapter 6: Startup Agility: Executing with Focused Flexibility 125 The Paradox of Strong Execution The New Venture Learning Curve Chapter 7: Integrity of Communication: Your Secret Startup Weapon 149 No One Is Immune to Reality Distortion Integrity of Communication: The Basics Four Personal Tools for Bursting the Feel-Good Bubble Chapter 8: Staying Power: Give Your Venture Time to Take Flight 169 Venture-Level Strategies: Strengthening and Lengthening Your Runway Founder-Level Strategies: Performing and Persevering over Time Appendix A: Startup Readiness Tool 191 Appendix B: Resources and Readings 207 Notes 215 Index 227 AmericanManagementAssociation•www.amanet.org Foreword Most of us harbor thoughts of starting a business. It is a delicious fantasy while staring at gray cubicle walls, or toil- ing outside for an hourly wage under the command of someone who is profiting from the fruits of your labor. “I can do this,” you say, “How hard could it be?” Some, emboldened by the desire to take charge of their own des- tiny, actually take the leap. Things can go well for a while, until the moment when they real- ize that there are a whole lot of things that can go wrong. And that if they had known then what they knew now, they may not have been so quick to give notice at their job, or to invest precious money, time, and energy in an idea that was not quite ready for prime time. The greatest heartbreak, popular success publications tout, is failing to do something about your burning passion for a world-changing idea. A greater heartbreak, in reality, is placing this idea onto a shaky foundation, and watching it fall apart. What is really driving your desire to start a business? If you are like most people: 9 You want to make an impact in the world. 9 You want to create wealth for yourself and your family. 9 You want to translate your idea into a tangible product or service. 9 You want to have flexibility to spend time with your family. 9 You want to feel fully alive. 9 You want to use your strengths in a way that leads to deep value. These desires are not fantasies. There are thousands of entrepre- neurs who have built successful businesses on a solid foundation and accomplish these goals every day. AmericanManagementAssociation•www.amanet.org vi Foreword The difference between them and others who end up in the “failed” pile of startup statistics is that they cared enough about their ideas to give them the very best chance to succeed. Caring means researching. Caring means testing ideas before committing too many resources. Caring means not brushing off peo- ple who challenge your idea. Caring means getting the very best ad- vice from people who have successfully guided companies through the startup phase and beyond. In 6 Secrets to Startup Success, John Bradberry, a calm, steady hand and seasoned mentor, brings an invaluable voice of reason that will guide you every step of the way without preaching or dampening your enthusiasm. He celebrates entrepreneurial passion while giving it the structure it needs to result in business success: The solution lies not in ratcheting down passion, but in elevating awareness. By pausing early in your startup process to take an ob- jective look at yourself and what you bring to the table—your pur- pose, goals, skills, resources, and needs—you can develop a highly valuable kind of optimism, one that rests on the rock of clear, hon- est assessment and willful preparation. I call it earned optimism. It is such a relief to know that sustained energy to grow your busi- ness is not based on manufactured enthusiasm or pep talks from mo- tivational speakers. It is based on executing a well-defined yet flexible plan in tiny steps, leaning into the market and adjusting your business model as you go. If you want to mitigate and reduce risk to your career, your fi- nances, your relationships, and your health before starting your busi- ness, read this book. You will breathe easier. Most important, you will increase the likelihood that your busi- ness will be a raging success. —Pamela Slim, author, Escape from Cubicle Nation: From Corporate Prisoner to Thriving Entrepreneur AmericanManagementAssociation•www.amanet.org Acknowledgments Writing a book is similar to launching a business. Each requires more time and effort than expected, and most of the sacrifice comes from people other than the author (or founder). Looking back, I’m amazed at how many talented people generously contributed to this project. I cannot name them all here, so I will hit the high notes. The only thing harder than being married to an entrepreneur is being married to a first-time author. My wife, Kristin, has endured both. She advised and supported me throughout the writing process, providing invaluable feedback on chapter drafts and all kinds of emo- tional and tactical support. She took on more than her share of re- sponsibility for our family life while continuing to inspire me in her own professional career. Thanks, Kristin, for being my best friend and most trusted editor. Thanks to Phoebe and Isabelle, for cheering me on while putting up with the strange hours and obsessive habits of a book-writing dad. Phoebe consistently motivated me with her own quiet determination, and Isabelle single-handedly risked life and limb to save thirty pages of a chapter draft that had blown into the street from the roof of my car. Thanks, girls, for encouraging me and for keeping me going. This book couldn’t exist without its central characters. I’m in- debted to founders Lynn Ivey (The Ivey), J.C. Faulkner (Decision One Mortgage), Mark Williams (Modality), and Mark Kahn (TRAF- FIQ), for their courage, expertise, and openness—and for allowing their founding stories to be shared with the world at large. One of the themes of this book is that launching a business is a highly per- sonal, emotional process. I have not taken it for granted that these founders were willing to be so generous with their lessons learned, and I know readers will benefit greatly from this generosity. I owe a special thanks to J.C., who has been a favorite client, trusted friend, business partner, and mentor for many years now. Thanks also to other colleagues and experts who lent their voices to the narrative by allowing material from their interviews to be in- cluded, especially Chris Holden, Robert (Bob) Tucker, Ken Macher, Shaun Cassidy, John Davenport, Doug Crisp, and Jerry Schiano. AmericanManagementAssociation•www.amanet.org viii Acknowledgments Dawn Ballenger, who came to this book project just as the writing of the manuscript was beginning, has been the person most indispens - able to the quality and integrity of the finished product. Dawn spear- headed the book’s research, was a close partner in developing the ideas and structure of each chapter, and brought a gifted editorial eye to all drafts. She has also become the rock of Ready Founder Services and ReadyFounder.com, driving our most vital research and product development efforts. I owe a great debt to David Fugate, founder of LaunchBooks Lit- erary Agency and a thriving entrepreneur himself, who was willing to back a first-time author and provided expert coaching throughout the process. Lori Spangard, of Terrace Blue Marketing, was vital dur- ing the project’s earliest days, helping me shape first proposals and connecting me with David Fugate (thanks also to entrepreneur ex- traordinaire Louis Foreman, founder of Enventys and creator of Everyday Edisons, for the assist here). It’s been a pleasure working with the publishing professionals at AMACOM Books, especially Robert Nirkind, who believed in this book and invested more than his share of energy and ideas in making it a reality, and Erika Spelman, who did most of the heavy lifting to bring it past the finish line. Adam Ortiz, of Executive Development Consulting, has provided tremendous thought partnership and friendship throughout the proj- ect. Thanks, Adam, for reading early drafts, for codeveloping the En- trepreneur Core Characteristics Profile (thanks also here to S. Bart Craig of North Carolina State University), and for being a rock-solid business partner. Thanks also to Mary Bruce, a pro’s pro when it comes to business and management consulting, an early believer in the concept of as- sessing entrepreneurial readiness, and a trusted colleague and busi- ness partner. To Pamela Slim: Thanks for your generosity, leadership, and sup- port for me and for Charlotte’s (and the planet’s) entrepreneurial community. In no particular order, for a range of contributions without which this book would not exist, thanks also to: Matt Spangard and the team AmericanManagementAssociation•www.amanet.org Acknowledgments ix at Enventys, Daniel Isenberg, Barbara Spradling, Mark Peres, Colleen Gentry, Ted Zoller, Jill Olmstead, Ken Murrah, Bruce Nofsinger, Julie Nance, David Schroeder, Carol Ham, Ben Williams, Suzanne Fetscher, David Dotlich, Peter Cairo, Stephen Rhinesmith, Fletcher Fairey, George McAllister, Ron Meeks, Paul Wetenhall, Phil Hajek, Gary James, Karen Hills, Nancy Owens, Julie Negrin, Richard Good- man, and Jeffrey Kane. Finally, I am grateful to my parents, Mary and George Bradberry, for instilling in me a curiosity and a love of learning, and to brothers George and Jim and sister Julee. Your teaching and spirit are deeply imprinted throughout this book. AmericanManagementAssociation•www.amanet.org