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motivation

How much have you tried? How much have you failed?

GoPro has become synonymous with action cams.  That didn’t happen overnight.  Nick Woodman moved in with his parents after his first business failed, as this American Express commercial mentions.

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If you don’t build your dream, someone will hire you to help build theirs

It takes money to make money

As the saying goes.  Today I went with a client to an SBA lender meeting and some take-aways that I wanted to share from that meeting are:

  • Be willing to invest 15-20% of your own money into the business.  This means, if you are asking for $10k, then prepared to get $8,000.  No lender will feel comfortable investing in something that the founder doesn’t have “skin in the game.”  That means, if the founder doesn’t have whatever of their own money have to put into their project, then it implies that the founder isn’t convinced in the business’s success.
  • Have good credit.  This is mostly a gauge for lenders to determine how responsible the entrepreneur is.  For start-ups, there is no track record to base a lending decision on.  So the next closest track record is that of the founder.  Those with bad credit should consider having a co-signer.
  • Have collateral.  This is so that the creditors have something to get if things go south.

That said, sometimes, it does not take hundreds of thousands of dollars to launch.  This great infographic made by Anna Vital at FundersandFounders.com shows the starting capital a few well-known companies started with.

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Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did no. So throw off the bowlines, sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. – Mark Twain

Dream big

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David vs. Goliath

Over the weekend I was doing some industry analysis for a client. She had a great idea and a novel one at that. Well it turns out that there was one other company in the same niche. A direct competitor…that has the early mover advantage.

So what do you do when your the new kid on the block?  Like anything else, with lots of hard work and a great deal of luck.  Let’s look at the case of Netflix vs. Blockbuster for guidance.

In 2004, Blockbuster had about 9,000 stores globally and revenues of over $6 billion.  Netflix had started just 7 years prior.  Fortunately it had several things going for them:

1.  Hard work

  • Competitive Advantage – Netflix’s algorithm takes user ratings on movies they rented and then make (i.e. compute) recommendations for other films that they might like, including movies that the viewer may have never heard of.  This rating based recommendation is very common-place now (seen everywhere from Pandora to Amazon), but in 1997, Netflix’s algorithm was a competitive advantage.  Viewers get recommendations they really enjoy, customer retention & satisfaction increases, money comes in.
  • Constantly Improve – One of Netflix’s criticisms is that DVD delivery was often slow.  Creating a logistics and inventory management system that receives orders and quickly sends out product, in addition to receiving returns and repackaging for reshipment was key to customer retention & satisfaction.  Netflix is still staying current by moving from DVDs to streaming VOD.

2.  Lots of luck

  • Competition was Flat-footed – Blockbuster kept the same mentality of a 1985 video rental shop.  They held on dearly to their late-fee revenue source, and its high fees and strict enforcement soured customers’ views of the business.  The late-80s/early-90s business model put them behind.  All they did was copy.  In 2005, they finally did away with late fees.  In 2009, they introduce Blockbuster Express, a DVD rental kiosk designed to compete with Redbox.  By now customers are streaming videos and renting DVDs at kiosks, while Blockbuster is trying to off-load their many stores.
  • Competition Thoughtlessly Expanded – Blockbuster rapidly expanded adding its 1,200th store by June 1990 and 9,000 stores worldwide by 2004 .  They wanted to be the biggest.  And fast.  The filled their stores with not just movies, but video games, candies, and other goods.  Unfortunately, all these stores require operating expenses.  Operating expenses that where greater than the gross profit (i.e. Revenues – Cost of sales).  Also, among many stumbles (which is much too long for this post but I put some references below so you can read to your heart’s content) is they failed to anticipate how media consumption will change.  From analog to digital.

Fast forward to today, Netflix has a share price of over $400, revenues of $4.37 billion USD, and over 2,000 full-time employees.  Blockbuster is bankrupt.

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However, like most engaging stories, the end is never the end.  Dish Network purchased Blockbuster and its remaining 1,700 stores on April 6, 2011 for $233 million and took over Blockbuster’s $87 million in debt and liabilities.  Dish now continues to license the brand name to franchise location, and keeps its “Blockbuster on Demand” video streaming service and the “Blockbuster@Home” television package for Dish subscribers.  Maybe this strategy to resuscitate a nearly-dead brand  sounds foolish.  However, so did mailing out DVDs.

For more info:

http://www.referenceforbusiness.com/history2/93/Blockbuster-Inc.html

http://www.ibtimes.com/sad-end-blockbuster-video-onetime-5-billion-company-being-liquidated-competition-online-giants

http://www.fastcompany.com/1690654/blockbuster-bankruptcy-decade-decline

http://www.getfilings.com/o0000930661-02-000951.html

Click to access BBI_10_K.pdf

Dare greatly

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“Great” means different things to different people. To some can be it opening their own Laundromat. To others it means to completely change an industry. Whatever you do, be the hero of your own story. And make it a great one.

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Technically it’s page 2 but you get the idea

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The year is winding down and New Year’s Resolutions are coming. So…

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