The Ten Commandments

The following article first appeared in UPSIDE magazine in 1996. It was good advice then and it is good advice now. Despite changes in technology, VC funding preferences and exit strategies, the advice for entrepreneurs is timeless.

Since 1992 (until 2001), I have chaired the MIT Enterprise Forum's Start-Up Clinic, which brings entrepreneurs together with seasoned executives, who provide feedback about the entrepreneurs' business plans. Although the businesses may be different, these plans suffer from similar shortcomings. The difference between success and failure can be stated in a few simple principles. Some of these principles are obvious, and it remains a surprise that so many entrepreneurs overlook them. These principles are important enough to be called "commandments." And, without the wisdom of Moses, I now bring them to you.

1. Know thy customers and target them well. Focus thy business by segmenting thy markets, yet keep thy segmentation flexible.
   Focus on a couple of key customer types, meet all their needs, and then exploit the word-of-mouth referrals. Meet 100 percent of the needs of 10 percent of your customers. If you meet 70-80 percent of the needs of 80 percent of your customers, you will probably need a lot more money. The money will be used to backfill the needs of many customers and blunt the negative things that are said about you by the rest.
   
   
2. Thou shalt watch thy cash flow with care so thine tax and debt payments can be on time.
   Money doesn't buy happiness, but it gets a lot of the things entrepreneurs need. Hoard your cash. Never own if you can rent. Never pay if you can swap. Remember, nothing is free. You get what you pay for - if you are lucky.
   
   
3. Thou shalt understand thy business and thy competitors' businesses.
   Estimating your small percentage of a huge market probably means zero sales if you don't know why or how someone will select your product over all others. Success also means you must produce, distribute, fulfill and collect from the members of this small percentage of the total population.
   
   
4. Thou shalt not confuse compliments with friendship nor skepticism with personal attack. Thou shalt not confuse an investor's compliments with a willingness to invest now.
   Entrepreneurs are expected to be committed to their venture, but they should not expect everyone to agree with them. Investors always want to be in on a proven good deal. Therefore, they are more likely to hide their true opinions in case they are wrong.
   
   
5. Thou shalt avoid superlatives and treat the phrase "conservative estimate" as an obscenity.
   Everyone knows an entrepreneur's dream is wonderful. Investors expect to see conservative estimates by definition. People make or lose money in the real world. Superlatives such as "great" or "terrible" do not describe real-world events. Rather, these are words that are applied by others as they observe what you do with real-world events.
   
   
6. Thou shalt calculate return on investment (ROI) privately, as the calculations are never done properly in public and are sure to be wrong.
   Make sure you can address how investors will get their money back and what the risk exposure will be. As a rule, most venture investors care about how many times their money will multiply. Investors interested in a percentage ROI are probably better partners.
   
   
7. Thou shalt search out criticism and listen to wise people. Listen politely to fools since thou hast sounded like a fool from time to time.
   Gather the best and most experienced people you can find for your board of directors and for advisory boards. Every deal needs criticism, and most people are too polite to criticize, or they want to be gentle. Customers are not so gentle. They vote with their wallets.
   
   
8. Thou shalt use appropriate presentation technology so thou shalt not appear foolish. Keep thy projector and audience focused.
   The medium is not the message. Make sure technology doesn't interfere with the points you're trying to make. Make sure your audience understands what you're saying and doesn't focus on the way you are saying it. Know how to turn the projector on and off.
   
   
9. Thou shalt not ignore thy social life or thy personal time or the time for quiet reflection, for thou must have fun at what thou doest. They who burn out are useless to themselves and their colleagues.
   Entrepreneurs love challenges and rise above adversity. Not every thing or event in business is fun for the entrepreneur. But when you look back over a career spanning 30-40 years, it is probably better to see more of what you enjoyed than what you considered drudgery. No one ever died saying, "I should have spent more time at work."
   
   
10. Thou shalt remember the help thou hast receiveth. If thou hast receiveth, therefore shalt thou giveth back. Yea, when the selfish inevitably taketh a fall, there shall be great hordes of people waiting to get even.
    Always share with others, no matter how meager a portion you may have.

About the Author . . .
Jim Geisman is president of Software Pricing Partners Inc., a business development consultancy in Wayland, Mass. He may be reached via e-mail at jimg@softwarepricing.com.