SAMPLE CHAPTER FROM "MAKING MONEY WITH YOUR TECHNOLOGY"
Here is a chapter from the Research Triangle Institute's Making Money with Your Technology. In this chapter, titled "Wish I Had Known," 24 entrepreneurs relay advice based on their business experiences. While much of the counsel is directed toward technology-specific companies, others might also find it useful.
02 I used to think business travel was a waste of time. But you can't afford to not be in contact with the people you are asking to take a risk on you. It's hard enough to get people to buy expensive, unproven equipment without also having no personal relationship. Plan travel time and budget for this. Visit your government customer -- it's reimbursable, and you can piggyback visits to nearby corporate prospects (just be careful to segregate expenses).
03 We thought everything was going great because we had numerous companies interested in our technology. Then it dawned on us that the largest of these prospects was only $10 million in size (revenue) with a total R&D budget of $100,000. After their own R&D costs, there was nothing left for them to invest in a new project with us. Plus, some of the prospects were serious about collaborating while others were just interested in free advice. Now I know to ask early on, "What is your budget for doing this kind of work?" and "Have you done any co-development projects with small companies?"
04 I started out thinking I could run the company on government contracts, and that eventually a product might fall out of the research. Instead, I should have expected from the beginning for the company to grow into a commercial business. Then I would have demanded that whatever we did related to getting a product to the market. Even in the midst of fulfilling the SBIR contract, we could have involved commercial users -- and NASA probably would have welcomed it.
05 A more professional image, especially in our office space, would have added credibility and helped us in selling to corporations. Even on a tight budget, we could have improved the carpet and painted the walls.
06 Don't fall in love with your technology! We took our eyes off the real reason we were in business -- to help users and to make money -- and it cost us.
08 I knew we shouldn't bite off more than we could handle, yet we fell into the trap of promising customers more than we were certain we could deliver. The breadth of the SBIR solicitation topics, as well as the competition, can force you into this trap. Nonetheless, the damage to the company's credibility, as well as the pressure on people's schedules, was not worth it. Stay focused and say "no" to some projects.
09 Before wasting a year, I wish I had understood that independent sales reps need a lot of attention. They require training, tech support, demo units, marketing materials, incentives, and competitive information. You have to stay on them and do whatever it takes to "prime their pump" just to get your first product sales.
10 The transition from conducting research to running a several million dollar business is not easy. It took me over five years to truly understand marketing and financial realities. As soon as possible, get some people on your team with that experience, whether as consultants or as employees.
11 As tough as it was, I finally learned to fire people who resisted our efforts to commercialize. For years, our company had been deeply rooted in contract R&D work. As a result, we had people who were comfortable developing specialized products for single customers, as well as people who were good at writing proposals and reports. But we couldn't grow the business because there was no leverage, which only comes with selling a product in volume. To address these different skills and subcultures, we had to spin off a subsidiary company dedicated to marketing products.
13 It seems obvious now that I should have used stock options as a way to maximize employee commitment. Everyone who contributes, and takes some risk, should share in the success of the company. When you can afford it, use bonuses for outstanding individual and team performance. For most people, it's not how much they get, but that they are appreciated.
14 No one ever feels they make as much as they deserve, but I also found out you get what you pay for. I should have paid higher salaries to get the best people in a few key positions. And I should have spent money to get more business experience on board, either as employees or as consultants.
15 I did not appreciate the value of a good board of directors. They provide a critical sounding board, and offer advice and encouragement based upon real experience.
16 Titles can be deceiving. In looking for marketing people, we hired the Director of Marketing from a major supplier in our industry. What we ended up getting was actually a sales person who had responsibility for overseeing things like advertising. Ask specific questions and check references to make sure the fit is right.
18 It's never any fun to hear criticism about your technology, your dream, or your management style. But I should have listened more. Being smart and having cool technology is simply not enough to run a successful business.
19 We spent a lot of time and money before taking a realistic look at what we actually had that people would buy. Sure, it's always a "chicken & egg" problem trying to market an unfinished product while developing new technology. But we should have gotten more outside business advice. Others' experience and judgment could see beyond our product, anticipate the sales hurdles we would encounter, and map out the best distribution channels.
20 It took so much time and effort to sign up a bunch of independent sales reps that we neglected to pay attention to what the market was saying. Our $10,000 product, even with its better performance and reliability, was not enough to win over the $4,000 competitors who already had an installed user base. We ended up redesigning and repricing the product for sale through existing software channels, which made it easier for us to manage and easier for end users to buy.
22 Before deciding to quit our IBM jobs, we wrote an operational business plan that detailed how we would do specific tasks. We also set a revenue target for year five that was as conservative as we could imagine. However, we learned that you don't hand that plan to investors. They don't want to see conservative numbers, they want to see the upside. The reactions and feedback we got really changed the way we thought about our business, and the way we communicated with investors.
23 We were way too loose with how we ran the business, basically operating on a day-to-day basis. We should have developed plans sooner and used them as management tools, particularly in areas such as cash flow and knowing what specific marketing activities we needed to undertake.
24 When you participate in a government contract, like SBIR, you have no choice but to get accounting help. So, I assumed that the numbers part of the business was under control. But most of accounting is documenting what happened in the past. I had to learn the hard way that I was responsible for projecting and managing the activities that produced those numbers. Now, I keep all the key numbers in my head such as break-even volumes, cash flow, and how much revenue we need to cover each new employee.
Updated Oct. 2, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.