Don’t anybody get their bloomers in a twist. This is my version of a post entitled Top 10 lies of Entrepreneurs by Jason over at Signals vs Noise, who is quoting Guy Kawasaki (formerly of Apple and author of How to Drive Your Competition Crazy) in his post entitled Top Ten Lies of Entrepreneurs. These posts covered the top ten problems seen in software startups who were pitching for venture capital. If you’re a designer in search of venture capital, watch these pitfalls. It’s amazing how much software and designer start ups have in common. My version of the questions appear in bold, Jason’s content appears in quotes and is edited for context.
1. I project my first year sales will be 5 million and this is a conservative estimate. I actually had someone tell me this.
Like Guy says, an entrepreneur has no idea what her sales will be. Projections, like fortune telling, are a waste of time.
2. WWD says our market will be $5 billion in 2010.
Who cares what [WWD] says – [WWD] isn’t giving you any of that $5 billion.
Just because a prognosticator forecasts growth in your industry doesn’t mean you’ll pick up a slice too. Too much is riding on execution.
3. Saks is interested in my line. This can mean anything from “I know somebody who knows a Saks buyer” to wishful thinking of where they’d like to place their line. Department stores are not the ideal customer for a designer-entrepreneur, not at the outset. If you plan and set up your business in order to service department stores, you’re going to be bleeding money from every orifice.
Never bet your business on one customer. Ever. Never give preferential treatment either. Every customer outta be the same to you or you’re going to start favoring the minority instead of the majority.
If you’re selling to a large department store (without a factor), anybody who lends you money will know you’ll be sitting on accounts receivables for 6 to 9 months and they probably won’t want to wait that long to see a return.
4. I’m hiring a contractor and pattern maker as soon as we get funded. To say your contractor or pattern maker aren’t on board yet means you don’t have production in the pipeline. There is no way you can develop a project plan if you haven’t priced the cost of production which can only be done through sampling. The project plan comes first, before the business plan.
Further more, it’s an empty promise. You can’t control other offers other people may also have while waiting for your precious funding to come though.
5. No one is doing what we’re doing. I must hear this every day, usually in conjunction with descriptions such as “edgy” (I move that we strike that adjective from the dictionary, it’s everywhere so it doesn’t mean anything).
It’s exceedingly rare that you’re 1. the only person whose thought of that, and 2. the only person doing something about it. It’s possible you are, but highly unlikely. Don’t bank on it. Like Guy says, “As a rule of thumb, if you have a good idea, five companies are going the same thing. If you have a great idea, fifteen companies are doing the same thing.” As an extension to 5), I’d also say that even if you are the only one doing something, it won’t be long before someone else comes along and does what you are doing.
6. No one can do it like I’m doing it. I’ll never forget this one. This designer was gluing stuff onto blank tee shirts. I say “stuff” because I wasn’t sure what it was but it looked like things you’d find on the ground outside of a dumpster and no, I’m not kidding.
[Fashion] is a commodity these days. If you can do it, someone else can do it. And it’s likely they can do it better. What really makes the difference is design, execution, clarity, passion, and the overall customer experience.
Trust me, anybody else can do what anybody’s doing and probably do it better -to say nothing of already having the money to do it. It may not be common but it’s out there. Most start ups don’t shop the market fully.
7. You’d better decide quickly because ______ is also interested in my line.
If you cry wolf you better be ready to rescue yourself.
8. My competitor is too big/dumb/slow to be a threat.
Fear and fire are good things when it comes to being an entrepreneur. If you don’t think you can be beat by the big guys you better think again. Yes, they’re slower, but they may be slow enough to watch what you’re doing, learn from your mistakes, and then clobber you down the road. I still think small has major advantages in the world of [fashion] but you better be humble if you want to play this game.
Never describe a line you aspire to hang with as a competitor because it implies you think you’re on their same level. They’re doing it and you’re not -yet. It’s better to over estimate the capability of those you aspire to compete with and to plan accordingly.
9. I have an MBA, my partner has a Ph.D so we know what we’re doing. While it is not always true, it is often true that having preconceived ideas dramatically increases your costs simply through inappropriate priorities.
Guy says this one best: “If the entrepreneur were that proven, that he (a) probably wouldn’t have to ask for money; (b) wouldn’t be claiming that he’s proven. (Do you think Wayne Gretzky went around saying, “I am a good hockey player”?)” Point here is that most of the people who have to tell others about their greatness usually aren’t so great (except for Muhammad Ali, of course). The way to demonstrate greatness is to prove it today, not to point to the past.
10. I’m getting a patent. Before you ever say this to anyone, please read pp 22-23 of my book and all the entries under the category of Intellectual Property. Otherwise it’s possible that people will not take you seriously, particularly if the design doesn’t even begin to approach technical novelty. I usually won’t work with someone who’s saying they’re getting a patent. If you had something of sufficient technical novelty to warrant a patent, in most cases you’d have to have the skills to bring it to bear yourself so you wouldn’t need me anyway. I see very very few things that are worth the bother and expense of a patent.