1. Lack of Preparation

Perhaps the number one mistake that new startup entrepreneurs make is the lack of preparation itself. A “One size fits all” approach to you startup is a disaster. Just like clients, each investor is different. Study the fund’s background, understand their investment thesis, gauge their mindset, and know why you want an investment from them (outside of capital, what else can they provide you?). Many startup founders are completely unprepared when entering the board room. Business plans are not required in the pitch meeting (in most cases), however, you need to be able to answer questions about the business plan. Practicing your pitch with each type of investor will help you in the long run and give you ample opportunity to perfect your pitch. Giving you the preparedness you need to nail the meeting and close the investment.

2. Unrealistic Expectations

The majority of entrepreneurs set the bar too high with unreasonably high expectations. They think an investment will change their life and make the startup instantly successful. In reality, this is almost never the case. Founders must set reasonable expectations of growth, revenue, profitability, and financials; backed by strong market research. Even if your product or service may be unique, build a logical approach to why your assumptions are valid. This will help to set your own expectations at a reasonable level. Furthermore, it can give you a clear mindset when approaching expectations with investors.

3. The Drama of Fundraising

Being an entrepreneur is definitely an exciting journey. However, the majority of founders lose their focus when they get excited about the fund raising process. The ultimate goal of fundraising is to obtain enough money to be able to fund the stage of your process. This could be product development, client outreach, human capital, etc. Entrepreneurs need to keep this in mind rather than just closing an investor. The majority of investors will see this, and may lose interest.

4. Value Proposition

While many startups are built on a unique idea, some of them are a “copy-paste” of an existing idea. Many founders are inclined to thing their “copy-paste” idea will be funded, because several similar startups have been funded. The problem with this approach is the lack of a clear value proposition. Questions entrepreneurs can ask themselves; Why is your startup different? How is it unique from the rest of your competition? Are you offering the same product / service in a niche segment as others? Are you offering the same product or service? Has the market seen your product / service before? Having a clear value proposition, product positioning, and product differentiation increase your chance of receiving funding.

5. Lack of a Clear Strategy

The success mantra for a startup is having the right product, the right team, a clear product need, and a solid action plan. Many startups fail in these items due to a clear action plan. Missing a clear action plan leads to confusion, higher capital burns, and a higher chance of startup failure. All startups should have a plan of a set of dynamically changing milestones across all time frames (short, medium, long).

6. Justifiable Valuation

If you walk into an investor meeting seeking, $1.5mm at a valuation of $15mm (10% of the company), you have to be able to justify it. The vast majority of startups cannot, they say they need ‘x’ amount of money to obtain ‘y’. This model is backwards. Entrepreneurs first need to determine their value then they can properly decide how much money to raise. With this model, startups need to discover what they can do with the money they are able to raise. This gives more confidence to investors when they are analyzing your company for investment. They know what you are going to do with the money and are able to justify your value.

Understand the value of your company may be difficult, and many mistakes can be made along the way. Five23 helps entrepreneurs and startups overcome these six items and determine the value of your company. By being an unbiased third party, we can determine value and analyze without prejudice. To learn more about what we offer startups, please follow the link here or contact us via email: contact@five23.io.

The post Top 6 Mistakes Entrepreneurs Make with Investors first appeared on Five23.

1. Make a “value-based” pros & cons list

Imagine that you’re considering a move. Will you relocate to another city? Pull out a piece of paper and write a classic pros and cons list for the move. Now, here’s where science has added a helpful twist. Assign every list entry a number from 0 to 1, based on your personal values. For example, if being closer to your family is a “pro” that’s extremely high on your list, you might score it at 0.9 or 0.95. If you listed “near the mountains” as another pro, but you’re more of a culture hound than an alpine hiker, then it might only rate 0.2 or 0.3. Do the same for the “con” side. Leaving a job you love could score 0.8, for example, if your career is an essential part of your life. Add up each side, multiply by 100, and see whether the pro or con side wins out. You can also make a separate pro and con list for staying where you are. Compare the final values and see how you feel about the outcome. Often, confronting a “logical” number (which was actually weighted with emotions) can illuminate subconscious feelings. If you see the numbers but still feel pulled in the opposite direction, it’s worth doing some deeper exploration. You can also use this technique for smaller, less personal decisions, like which project or feature to tackle next.

2. Explore future scenarios

Considering the best- and worst-case scenarios is a common way to make tough choices. What’s the very best future you can imagine? The worst? And how would you feel if that disastrous scenario became reality? To expand on this technique, psychologist Gary Klein has studied a twist he calls the “premortem.” In a Harvard Business Review story, Klein explains why a premortem is the hypothetical opposite of a postmortem.

       “A postmortem in a medical setting allows health professionals and the family to learn what caused a patient’s death. Everyone benefits except, of course, the patient. A premortem in a business setting comes at the beginning of a project rather than the end, so that the project can be improved rather than autopsied.”

       Imagine that your decision was terrible. The project you chose to tackle was a crash-and-burn disaster. Now, explore every possible reason for the failure. Once you address this worst-case scenario, you can take steps to prevent it — and make a better decision in the first place. In fact, research shows that premortems (which are also called prospective hindsight) can increase our ability to identify future outcome causes by 30%. On the flip side, try to visualize that epic, best-case future scenario and gauge how you feel. If you’re not happy or excited, it’s worth considering why. Amazon uses a variation of both these techniques. Company developers must draft a hypothetical press release and FAQ announcement before they even write any code. By working backwards, the team tackles the most difficult decisions upfront and clarifies the product’s value proposition.

3. Avoid binary choices

We often get stuck choosing between this or that. Should I go back to school or start a business? Should I move to Seattle or stay in Denver? It’s easy to see the world in black-and-white, but there’s typically a grey option in the middle — or several shades of grey. Maybe you could spend summers in Seattle and winters in Denver. Or, you could live in Denver for another couple years and move to Seattle later. Sometimes the right choice is not one of two opposites. It’s a more creative, nuanced, or flexible solution.

4. Consult with others

Sharing your dilemma with others can justify or reinforce a choice, but more importantly, it’s a valuable way to gather valuable information. If you can’t decide whether to move, for example, don’t just survey your friends and family (who will also have skin in your game); talk to someone who made the same move. Ask how they feel now about their decision. For professional or business decisions, try hiring a consultant. Find people who have deep, niche expertise and learn as much from them as you can. The extra information you gather will almost inevitably help you make better choices in the future.

5. Avoid hidden decisions

For nearly 6,000 years, North America’s First Nations hunted the plains buffalo by chasing them over cliffs and finishing the kill below. This method enabled tribes to gather and store large quantities of meat, hide and fat for the long winter ahead. I always wondered why so many bison would just run over the cliff. They were usually pursued by hunters on horseback, for one, but it’s also an example of herd behavior. All the animals are just following the group, letting the flow take them where it will. Buffalo jumps are a good metaphor for hidden decisions or non-decisions, which we’ve all experienced at times. When you procrastinate or delay an important choice, you’re still making a decision — and it’s rarely a good one. For example, maybe you need to part ways with an employee, but you put it off to avoid a potential confrontation. If the employee is negative, unpleasant, or ill-suited to their role, the choice to wait and delay can poison the whole team. Non-decision is a choice with real consequences.

Those 35,000 daily choices can be daunting, but quick action is the enemy of decision fatigue. Choose fast and whenever possible, tackle your choices head-on. Use as many methods as you need to pick the best solution. Just don’t follow the herd. Choose what’s best for you — and then stand firm in your decisions.

One final note: if you’ve started a business or launched a product and you’re feeling overwhelmed by all the decisions, please know that it does get easier. Additionally, Five23 can help you analyze your chooses. Our packages can help any stage startup reach its full potential and take the guesswork out of the process. Once your business is stable, many of the big, foundational choices are done and you will reach equilibrium. Then it’s time to focus on the constraints. Determine where you can make the most important, impactful decisions, and use them to grow or refine your business. Remember: decision-making gets easier with practice, and a new choice is always just seconds away.

The post 5 Techniques that Help Entrepreneurs Make Hard Decisions first appeared on Five23.

Customers not only become engaged through your brilliant product or idea, but also with your team. Your team is one of your strongest assets when selling or promoting your product and your passion as an entrepreneur. Taking the time to keep your team happy, connected and motivated will indeed help your startup achieve and maintain success.

Now answer this question: How many times have you preferred a company over another just because of how they make you feel?

If you answered “more than once” ─ it is enough ─ startups want returning customers rather than having one customer buying only once and then leave with a bad taste in their mouths. As you probably know people are there for the experience, i.e. not consciously thinking, so why not to use this fact to your advantage? Train your team regularly, value their skills, hire smart, challenge them to constantly innovate (who doesn’t like to be challenged!), and you will have your product or idea reaching many places at once.

Think of those times when you liked a product so much that you couldn’t stop talking about it. You talk about it at a party, at work, at the gym, you told your friends how great this product was for you that everyone should get one, because you have had a great experience with it. Probably the company who created that product never found out how enthusiastic you were about their product, but many of your friends remembered what you said and went ahead to try and test this new wonder. Does this sound familiar? This is exactly what your team is doing at this exact moment ─ talking about your idea, product, creation or innovation. Now, can you really control what people are saying about it? Most likely not, but if you spend as much time creating ambassadors in your team/for your company as you do working on your idea you are set for success.

Help your startup through your team; become successful through better practices; get quick wins setting your team up to win. Little, small or big wins keeps brains alert, alert to the next and quicker win. Training your ambassadors and boosting their motivation through clarity on what is expected, as well as communicating goals and objectives, providing tools, knowledge or skills will bring comfort to the entire team ─ thus building a sense of purpose and belonging.

Build a solid platform for your startup and your future customers. It’s never too late to start getting people on board.

Learn more about Five23 and how we can help your team.

The post How Teams Engage Future Customers first appeared on Five23.

For the majority of service-based startups, this revenue comes from a subscription based model. When customers are paying for a service on a monthly basis, the revenue received by the company can be classified as Monthly Recurring Revenue (MRR).

MRR is used in a myriad of ways for analysis, but it is generally used to give an investor insight into the overall health of the startup. This level of health is determined by combining a few factors MRR accurate predicts. Such as:

Revenue Momentum
Customer Lifetime Value
User Growth
Churn Rate
Average Selling Price Trends

When each one of these items is calculated against the MRR of the company, one can have a clear view of the company and its projected revenue growth over time. This insight of the company proves invaluable for many investors, and may be the difference in receiving an investment or not.

To better secure the MRR of a company, the startup must take actions to create reasonable insurance the revenue will occur at the set monthly interval. This can be done in a few ways, but generally, is handled by automated payments and/or a binding legal contract. Having a contract ensures the payment will be made until a specific date or an indefinite amount of time. While there is always a certain percent of churn (users canceling their subscription to the service), the overwhelming majority of users will not break their contract.

When weighed in the balance, the amount of MRR the startup receives is invaluable to their success as a subscription based company. While this metric doesn’t fall into typical accounting practices, it is important to know this metric when dealing with investors and raising venture capital.

The post The Importance of MRR (Monthly Recurring Revenue) first appeared on Five23.