No one knows more about starting their own business than Cynthia Kocialski. In the past 15 years, she has been involved in dozens of start-ups and has served on various advisory boards. These companies have collectively returned billions of dollars to investors. Cynthia has worked with established companies to bring start-up techniques and technologies to corporations desiring to process improvement and efficiency. Cynthia is also the author of Start Up from the Ground Up: Practical Insights for Entrepreneurs, which we’re going to find out more about.

Thank you for this interview, Cynthia. Your new book, Start Up from the Ground Up: Practical Insights for Entrepreneurs, was written for the new business owner to help them overcome some of the fears of starting their own business and how they can turn their business into a success. How did you become interested in helping new business owners?

Cynthia: In the course of a few weeks, several different people mentioned to me that I should write a book. At the same time, the topic of personal branding was becoming popular across the Internet. At first, I rejected the notion because I didn’t know what to write about. One day it suddenly occurred to me that one of the reason people always wanted to have lunch with me was to talk about my start-up experiences. I found that I repeated myself a lot. Start-ups follow similar paths, encounter the same issues, reach the same conclusion and make the same mistakes – over and over again.

What companies have you helped in the past?

Cynthia: I work mostly with technology companies. The longest start-up I worked with was Catamaran Communications, which I worked with for more than four years, starting when they had just a handful of people and they were eventually acquired for $500 million by Infineon. I have also been an advisor to Cypress Semiconductor, which has been publicly traded for decades now. Statistically speaking, the venture capitalists, these are the institutional investor for the technology start-ups, have funded 30,000 start-ups over the past 10 years. Only about 250 of them have gone IPO and become public companies. And only about 3 out of 1,000 become a Microsoft, Intel, or Google. Angel investors, those private investors that often provide the initial capital, funded far more start-ups. To put this into perspective, there are only about 15,000 US public companies. Most of the companies I’ve worked with, not many people have ever heard of.

What mistake(s) do you believe new business owners make when starting their new businesses?

Cynthia: The first mistake is focusing too much on their skill. Entrepreneurs have a particular skill set or background, and they tend to immerse themselves in skill based tasks instead of focusing on building a company and business. For example, if the plumber wants to build a house, but spends all his time designing and making the best plumbing system ever. That’s wonderful, but what about the rest of the house. The plumber honed in on what he knows. The funny thing is that the easiest skill for a plumber to hire is another plumber because it’s what he knows best.

The second mistake is not talking to customers, mentors, and market experts. Don’t wait for them to come to you; you need to reach out to them. When a company becomes a Microsoft or an IBM, everyone wants to talk to you. But when you’re a new start-up – an unknown, no one will want to come to you, not even your rolodex contacts will return your calls. To succeed, your company’s product has to be something to somebody, and you can’t find this out by hiding in an office. Most tech start-ups are founded by the unusual engineer, programmer or scientist who is extroverted, or by the introverted geek who has found an extroverted partner. Remember Apple was founded by two Steves – Steve Wozniak who is the quiet techie that most people forget, and Steve Jobs who is the outgoing showman.

Another mistake is marketing too little and too late. Entrepreneurs underestimate the extent of the marketing and sales effort. Marketing creates demand, sales takes that demand and converts it into revenue. Marketing takes time. You don’t build relationship with your customers overnight or in a week. They need to get started as soon as possible. Marketing is also very time consuming, so don’t think you can make this someone’s side task.

For a new business to succeed, what tips do you recommend?

Cynthia: You need to develop a detailed business plan, but don’t start with one, which is contrary to what you’ve been told. There is a mindset that once you have a business plan, it’s the step-by-step recipe for what has to be done and people then blindly follow it to failure. The first product idea almost always fails, and the business plan is meaningless. Instead start with a concept plan, which is a product idea and a notion of what the business is going to be, but a concept plan is an open admission that you are going to test the waters and validate the assumptions. The goal of the concept plan is to figure out what the detailed business plan should be. I’ve seen companies spend a year or two in this process. Getting customers to talk with you isn’t as easy as it sounds. The best way is to find places where they congregate and are there to make connections. They will be far more willing to speak with you at a conference than meet with you in their office. Many start-ups don’t begin the marketing effort soon enough because they believe they need the product first. Start-ups can talk about the problem and they can use their subject matter experts to deliver information. A knowledgeable PR person can think of numerous ways to promote a start-up prior to a product.

What’s the #1 reason new businesses fail in your opinion?

Cynthia: According to all studies, it’s because most businesses are undercapitalized. They run out of money. But that’s the symptom, not the cause. The root of the problem is because the entrepreneur doesn’t realize that the initial years of a business are about figuring out what the real business should be about. On day one, the founder has a firm idea of what is the product or service, how they plan on attracting customers and grow the business. Sometimes the entrepreneur gets lucky and they are right at the onset, but that’s a very rare exception. Most of the time, they aren’t fortunate. Entrepreneurs have to constantly be reassessing the validity of their product and business model, continually changing it – sometimes completely. The first failure is caused by the start-up holding to its original plans, refusing to change, and by the time they are willing to admit there is the need to change, it’s too late. The second type of failure is when they change too much, never giving it enough time to see if there is any potential in a direction. The failure is ultimately due to the uncertainty of how long that process will take, and it always takes much longer than anyone anticipates. It’s like playing a card game. There is great hope for a victory as the cards are being dealt. Then you pick up your cards and access the situation. Sometimes you are dealt a fabulous opening hand and sometimes it just awful. After a few plays with that hand, you get a feel for whether you’re going to be able to win or not. Regardless of the opening hand, you sometimes have to change your strategy completely in order to win. Kids don’t ask for advice and don’t rethink their strategy, they blindly follow their first assessment, and they lose unless everything goes their way by chance. That’s why many first time entrepreneurs fail because they play the start-up game like young kids play cards.

Take Walmart for example. A new Walmart was built in my area a few years ago and when the local Mom and Pop stores heard about it, they knew they were doomed and, in fact, years down the road, they are struggling. What would you recommend to them to keep their businesses afloat?

Cynthia: Walmart was not the first store of its type. Before Walmart, there was Kmart and before Kmart, there were the five and dime stores. Simply because Walmart is one of the dominant players now doesn’t mean a Mom and Pop shop can’t succeed. What they can’t do is be just like Walmart. You can never win head-to-head against the incumbent without a lot of capital behind you. For a Mom and Pop shop to succeed, they have to figure out what part of the market Walmart does not address and build from there. I worked with an online ecommerce store that offered specialty toys and education products. Their offering was popular products, but not so popular that a Walmart or Amazon would carry them. Walmart products are high volumes and low margins. These specialty products were high margin and somewhat lower volume, but the huge margin difference made up for the volume difference. Before the Internet, information about these specialty products was controlled by a few sources. Now, everyone is on the Internet – both consumers and suppliers, and consumers are finding out about these products. An interesting point of this ecommerce business is that more than 80% of their business comes from small town USA because all these small towns have Walmart, but you can’t buy these specialty and niche products there.

What would you recommend entrepreneurs who have high hopes of starting their own businesses and having them succeed do in light of the economy when even well established businesses are failing?

Cynthia: It’s the best time to start a business because when the economy recovers, and it will, the company will be sitting there as the economy ramps up and will capture the bulk of the expansion. Customers resist change. People don’t change unless they have to. When the established businesses are failing, customers have no choice but to try something new. They are forced to change and this is good for the new start-ups. Established companies fail for a lot of reasons. A bad economy simply pushes marginal businesses to fail quickly. Most of these business would have failed anyway, it’s just they would have died a slow death in a better economy. A couple of years ago, I was hired as a change agent for a company that had been failing for more than ten years. When I interviewed people about what needed improvement, I found a very deep resistance to change. The employees didn’t want to do things differently – they didn’t want to learn new tools or techniques. They had comfortable lives. When the recession reached its deepest, the company finally collapsed. It wasn’t the recession that caused the failure; the company would have failed anyway.

Thank you so much for this interview, Cynthia. Do you have any final words?

Cynthia: The truth of entrepreneurship is that it’s a lot like a weight loss program. What’s the caveat in the ads, “Results may vary. Results are not typical”. Anyone can succeed, but few do. Everyone knows how to lose weight, but few have the fortitude to actual do it. Everyone wants the results, but the process isn’t easy. A person who succeeds on Weight Watchers would also have succeeded on Nutrisystem. It’s not the program. It’s whether the dieter has the motivation and will to succeed. It’s the same with the business owner, entrepreneur and start-up. Do you as the entrepreneur have the dedication, determination, and consistency to make the start-up work? If you view the process of building a company as a struggle and are reluctant to begin the difficult journey, you will give up. But if you view the process of building a company as an adventure, you’ll probably succeed.

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