1. There were 318,000 active angel investors in the US last year up some 20%. (Center for Venture Research)
2. They invested $22.5Bn up 12.1%. (Center for Venture Research)
3. This implies an average angel investment of $70,755.  (Center for Venture Research) (larger than I would have guessed)
4. The $22.5Bn was invested across 66,230 companies, an increase of 7.3%, implying an average deal value of $339,725, 4% increase.  (Center for Venture Research) (larger than I would have guessed)
5. The sectors attracting that money were in order: Software 23%, Healthcare 19%, Industrial/Energy 13%, Biotech 13%, IT Services 7%, Media 5%. (that’s 80% of it) (Center for Venture Research)
6. Angel investments that exited in 2011 did so 54% of the time by selling out and 24% of the time by going bust. (Center for Venture Research)
7. In addition to this analysis, the first ever HALO Report issued by CB Insights in conjunction with Silicon Valley Bank and the Angel Resource Institute attempts to dig deeper into Angel Groups not just individual angels. Their analysis provides even further insight to Angel GROUPS. Specifically these groups invested $873m in 2011. (which implies to me 4% of the total market investment above of $22.5Bn)
8. The $873m was invested in 573 deals at an average deal value of $1.5m and a median value of $700,000, up a whopping 40% increase over 2010.
   These seem really high to me.
9. Regionally the $873m was spent in order: California 21%, Great Lakes 15.5%, New England 14.6%, Southeast 12%, Southwest 8.9%, Mid Atlantic 8.9%, Northwest 7.2%, New York 6.6%, Great Plains 4.1%.
10. Sectors wise Angel Groups spent their money 37.4% of the time on Internet and 23.5% on Healthcare, that’s 61% right there. Mobile picked up 10.4% and Energy 4.3%.
11. The active Angel Groups were named by Halo as: Tech Coast Angels – Southern California, Golden Seeds CA, MA, NY, Band of Angels (great name) Menlo Park CA, Central Texas Angel Network, Austin, TX and Launchpad in Boston, MA

Conclusions

1. I’m quite surprised there as many as 318,000 active angel investors given how few businesses sell out every year for $10m or above (6000) thus creating US angel investors.
2. I suspect there is a Powers Law curve at play and that a tiny % of big hitters of the 318,000 are skewing the average towards $70k.
3. We need to conduct more research to understand the make up of 318,000 active investors compared with only 573 deals tracked by the Halo Report of active Angel Groups.
4. I worry that at both the macro $22.5Bn level and the smaller sample of Angel Group level there remains a dominant software & healthcare mentality at the expense of Energy, Media and IT services. It almost implies that software and healthcare are less risky than other sectors or perhaps the management teams just tell a better story!

Tweet

Metrics measurement with no accountable action is like rearranging the deckchairs on the Titanic – pointless.

Key Metrics Measurement Tips

1. Ask yourself, what question is the metric I’m measuring answering and who is going to take action if the metric falls below an acceptable level?
2. Is there an editor and an author of the metric. Different roles. Both essential.
3. Sales – sales professionals need to really understand their “cookbook” of a successful month. This traps the behavior that leads to success. The behavior can vary from sector to sector but usually includes the sales person defining a minimum number of key metrics that lead to success. We all need benchmarks to know we are tracking great behavior. How we feel is almost irrelevant. You could feel tired but be confusing activity with effectiveness. What are the 12 key ratios that if your sales professionals nail will lead to high financial success. Define them, measure them relentlessly and let your sales professionals manage their business.
4. Marketing – the plethora of ratios that can be measured today is stunning. However I’m finding that often that’s as far as it goes. Better to reduce the number of metrics but ensure someone in sales, marketing or operations is actually taking action to improve the result. Make your metrics personal. Allocate each member of your marketing team the task of following through on each ratio. For example the leads from a geographic region are down or the leads from the construction sector is down, what happens next. Someone needs to take control of changing tactics to get leads moving in the right direction.
5. Finance, IT, HR, Production, Development all lend themselves to relentless measurement that either confirm your policies and tactics are working or failing. Agree in advance the protocols for action whether good or bad news. I’m always amazed as metrics are measured and published that the significance and follow through is missing. You see it all the time in written narratives summarizing the results. Tell me the significance of your ratios and what action you are going to take. Take control. Don’t wait to be lead.
6. Be careful not to measure the wrong stuff. As Seth Godin pointed out recently some metrics are meaningless. He cites the car dealership that bullies you into giving an excellent. “Only a 5 will do. You understand don’t you”, the car salesman will plead.
7. On a personal note I exercise on a regular basis and I compete at Masters Track medaling at the indoor national championships at 400m and 800m every year. I don’t get too complicated with metrics. I allocate an exact time of day 7 days a week. Exercise for 30 min. Measure the intensity of the exercise. (Try the Garmin Forerunner 410 for excellent graphs of pace and distance) Measure weight and resting pulse every morning. Increase intensity every 3 weeks assuming my weight and pulse are going in the correct direction. Take one week off every 3 months and enjoy it. That’s it.
8. As new technology comes along whether its a new app measuring your sleep patterns or new insights into your customers through massive analysis of data crunching, remember Analysis for Action is the key or why bother!

 Tweet

1. Sales – How do CEOs drive sales?
2. Sales -How do you prepare for a Trade Show?
3. Sales – Why will a sales trainer fail to grow sales?
4. Sales – How do you improve sales close rates?
5. Exits- What are the odds of selling your business?
6. Exits - How do you stage your company for sale?
7. Exits – How do you know if your business is saleable?
8. Exits – How do you value a business?
9. Acquisitions – How do you justify them?
10. Budgets – How do you build the perfect budget?
11. Management – How do you inspire simplification?
12. Management – How do make money by having fun?
13. Management – How do you increase profits from your business?
14. Management – How do get projects completed?
15. Management – How do you execute with speed?
16. Management – How do you run a Board Meeting?
17. Innovation – What are the guiding principles?
18. Finance – How do you raise Venture Capital?
19. Finance – What is a PE ratio and why is it important?
20. Finance – How can you be a better CFO?
21. Social Media – How can CEOs capitalize on it?
22. Marketing - How do you get traction for your story?
23. Strategy – How do you reposition your company to make money?

Tweet

Firstly let’s be clear, every sales conversation is a negotiation meeting. And negotiation doesn’t start when your proposal hits the prospect’s desk! It starts when your prospect answers the phone, replies to an email, reaches out online. To maximize the return on their time there are two little things that world class sales professionals do better than anyone else:

1. They are clear on the questions they want answered
2. They are clear on the next steps including timetable at the end of a conversation

Every single online interaction, phone call, face to face meeting gets the same treatment. So if you do nothing else as a sales manager – ensure that all prospect conversations recorded in your CRM system, contain evidence of sales professionals asking questions and recording clear next steps with dates. Simple but a violently efficient way of crushing pipelines.

Write to ian.smith@portfoliopartnership.comTweet

One thing is certainly true, grabbing attention and specifically users is the start of a business model but I don’t believe you can call it a business model until you charge money for the service. Building a business for a specific buyer is a long odds game. However building a business with an eye on what buyers admire and cherish is a very good idea. It forces the owner of a business to work on the right stuff. A summary of the stuff that buyers cherish was covered here.

Crazy Statistics

As you consider building your business and hopefully your value it is worth considering these US statistics I’ve gathered for you:

1. 27.3 million – the number of businesses in the US – (US census data)
2. 26.7 million – the number of businesses employing 19 people or less – (US census data)
3. 5930 – the number of businesses sold last year for $10m or above (ACG)
4. 6703 – number of small businesses sold last year that BizBuySell tracks. Average exit value of $155,000. (that’s right $155k)
5. My estimate of all small business sales given that BizBuySell are the biggest broker with a small market share, is around 200,000 deals. But the average value I estimate is in the $100k to $150k range.
6. So around 99% of business owners are not realizing sufficient cash to live off.

 Tweet

I’m convinced that we are choosing products and services based on one feature! As decision makers we are boiling it down to one killer feature ASSUMING all main needs are met. If you take a range of strong competitors and assuming they are all covering the ground on 99% of your needs then I believe we are spinning the wheel, pressing the yes button on one main feature.

One Main Feature

• Blackberry’s browser sucks. Eventually people really needed a decent browser. Great email didn’t cut it. All the players delivered a great email service. All players offered pretty impressive security. The iPhone delivered a brilliant browser.
• HootSuite is a great dashboard for handling Twitter feeds. So is Tweetdeck. However Tweetdeck does something really key and really simple. It allows you to instantly see who is following you. HootSuite does not. I’ve stopped using HootSuite and gone back to Tweetdeck.
• Running gear has become quite advanced over the years. Shoes have developed in so many ways, shorts, vests, track pants have all improved. However if you race regularly you actually want a killer feature in your track pants. You want the zips to be long enough to be able to take the pants off before you race without taking your shoes off. Not all pants have that feature. Simple but compelling.
• Car performances across brands, within a class of car, are so similar theses days that you may well be choosing your car on the basis of the quality of the satellite navigation system. Or perhaps on the quality of the MP3 interface.
• Barbers, hairdressers, dentists, massage therapists, car repair shops are all in a very competitive space but the one you keep going back to always calls you 24 hours before your appointment to remind you. I find that very helpful.
• Airlines are offering very similar packages but does the screen at the airport automatically suggest a better aisle seat for free. US Airways did recently? That may become quite a distinctive feature
• As you book your hotel room for business or leisure and assuming you have a choice with similar prices, is there a tipping point feature? Wifi, music, quality of minibar?
• Mr. Systrom who just made $450m from the sale of Instagram to Facebook, struggled with his previous start up Burbn. Focused on the mobile space he struggled to explain it to anyone so he focused on the piece that people got – the photo feature!
• You have a choice of restaurant. Your shortlist of 3 have brilliant food, great atmosphere, cost $80 per head but only one has valet parking.
• It doesn’t surprise me that Ultrabooks are becoming so popular. If you combine ridiculously fast processing speeds, inside a remarkably thin and light laptop then consumers will buy. As I chose the Mac Air recently however it ultimately came down to the thinness. Could I literally take it anywhere at anytime.
• Dropbox is instinctively dead easy to save files and share files. That is all I want it for. It works on that basis. Easy of use.

Homework

You may have 100 features in your product but is your market ultimately making decisions on one feature. Is there one key function that would swing more of the market your way? Go find out what your killer feature needs to be. You might be surprised how a simple tweak could move you past the competition and then keep looking for a new one as they catch up!

Write to ian.smith@portfoliopartnership.com

Please feel free to comment below, love to hear your thoughts.Tweet

By way of practical advice (what else do you get on this blog) I’ve listed below a few ideas to ensure staff get it. I’m really addressing this list to smaller companies, employing less than 500 staff or as I describe them the 99.93% (27.26m/27.28m).

1. Visual Cues are a great way to tell staff what is important and to remind everyone that success depends on growth. Build white boards, strategically located and capable of being covered (for key guests being brought around the location) that show what matters to you as CEO. These are your key drivers for success.
• Will We Make It – a board that shows the sales results by team against target and last year and therefore growth being achieved
• Volume chart of unit sales by product family to show the leaders & the laggards, actual against last year
• Sector growth showing $ values being achieved by sales teams and the speed of velocity by quarter showing growth
• Consider new business brands being won as a roll of honor ( indicating the size of the brand to show significance, maybe group sales of new customer if it isn’t a household name)
• Show prospective deals being worked, $ amount, expected PO date Q2, Q3, Q4 etc – perhaps only the large opportunities
• These are your key visual cues so put up what is important to you as the boss, perhaps its new products launched, perhaps its productivity ratios but whatever it is I’d recommend showing a sales growth %.
2. As CEO own, repeat and endorse your positioning statement. Chase it down to your web sites, sales scripts, press releases. Repeat it at every opportunity.
   Make a habit to remind people what you stand for:

Bad example:

• DXP Enterprises describes itself as a leading products and service distributor focused on adding value and total cost savings solutions to MRO and OEM customers in virtually every industry since 1908. DXP distributes, pumps, tools, nuts, bolts and safety supplies.

   Good Example:

•  ADMET is a leading global material testing systems manufacturer. We enable customers to conduct comprehensive, repeatable tests to ASTM or ISO standards, while keeping costs under control and seamlessly integrating their testing procedures into their organization.

3.  Site visits: Every company has strategic accounts that are special. How much time does the CEO spend on site getting to know the key decision makers? Staying close to their strategy. Mergers, reorganizations, selling off non core activities are all events you want to know about ahead of time if they are going to impact your relationship with that customer.

4.   How much time does the CEO spend with key sales staff over coffee discussing the noise, signals coming from the marketplace? I’m not talking about attending formal sales meetings. I mean informal chats to stay connected with new trends, issues on customer sites.

5.    As CEO are you walking the trade show floor? Do you understand the positioning of your competitors? Do they see a market opportunity that you don’t?

6.   When was the last time you looked at proposals going out the door? Do you recognize the company in the copy? Are the words true to your vision of your company?

7.    As CEO are you exploring partnerships that can could lead to long term sales opportunities?

8.   As CEO are you writing smart, incisive white papers and blogs to attract attention to your company’s credentials?

 As CEO your actions speak louder than words. Some say there are only 3 things that the CEO should focus on; keeping the management team focused on delivering against the stated strategy, ensuring there is enough cash in the bank to allow execution and building the best possible team. Well, helping to drive sales growth probably delivers on points one and two and if sales are flying you’re probably boosting your attractiveness as a future employer!

Write to ian.smith@portfoliopartnership.com

 Tweet

The degree of difficulty of building a business worth $10m or more is almost impossible. You may look at a few superstars creeping onto the stock market with big valuations, or special manufacturers selling out for $100m to a bigger brother but trust me realizing a fortune by selling your business for $10m or more is only going to happen to a tiny percentage of the entrepreneurial population! Mathematically there are 600,000 companies in the US employing 19 people or more and of that 0.9% or 5930 sold out in 2011 for $10m or more. Scary.

The potential for building business value is huge but it is being squandered. We are sleepwalking our way to value. We are working on the wrong stuff. We are complicating matters instead of simplifying them.

“Your goals and your strategy must be simple. You must have passion and certainty in order to make a difference as a leader. Your tactics, on the other hand, should be layered, multi-dimensional and reflect the patience of someone who cares about reaching a goal” Seth Godin.

But you see most entrepreneurs don’t choose one thing to be remarkable at instead they run their businesses like upside down pyramids. Their strategy is multi faceted and multidirectional, crossing over many activities and their tactics are often single threaded, lacking in depth and lacking layers and patience to reach their goal.

Instead think of Seth’s quote above. Articulate a specific simple strategy that you can aim for, the point of the pyramid. Think of your tactics as multi layered and linked to your strategy, spreading out down the pyramid!

Look at Carbonite, does one thing really well. Back ups your computer automatically. Formed in 2005, now worth $300m on Nasdaq. Think of Google’s home page v Yahoo. Simplicity. Think of Apple’s incredible focused desire to build beautifully designed, practical, fast products. ING the fastest growing savings bank in America. From a standing start in 2000, by 2005 it had 3.5m customers, $40Bn under management and no ATMs and no financial advisers but it did have a great savings rate.

The Linkage
But even with a simple and compelling story you will fail if execution is weak. So you need to link that simple goal with world class execution. It’s not about bringing in superstars either. Its about designing appropriate blueprints that your existing staff can use to help you scale the business. OK eventually you will need to augment your team with new talented hires but not immediately.

Keep it simple. Take your new tightly defined positioning (Playbook #1)and think of making it happen in 5 more Playbooks: Marketing, Sales, Product Road Maps, Talent Pool and Metrics. Think in terms of 60 day action plans. Look for quick feedback why its not working because some stuff will not work. Adjust. It could be pricing, targets, service levels, technology, landing pages, poor fit with individual key roles. Whatever it is, adjust. Curate features on products. Try and test quickly. But remember the big goal. Align the efforts of departments to ensure everyone is pulling in the same direction. As a summary, this is how the Playbooks integrate together:

#1 Positioning: Sets the big goal, the big strategic direction of the company. This is who you are. It defines you
# 2 Marketing: The big story is now picked up and blown into small pieces everywhere, boilerplates, web site narratives. blog editorial calendars, marketing metrics measuring your story’s traction, lead generation targets, social media strategy, anything that takes your message to market.
#3 Sales: Scripts are now anchored in the big story lines, consistent with marketing stories. Business results you claim you can deliver for customers are now picked up by well trained sales teams who  translate this into parochial relevance for each customer/prospect. Life feels connected. Sales love marketing because the messaging is something they can believe in and the leads that marketing generate (not exclusively) are of a decent quality.
#4 Product Strategy: Now the product team have a strategy to tee off. The Positioning statement effectively defines the product road map. Why build something that doesn’t fit with who you are?
#5 Talent Pool: By defining your story you become so much more compelling to prospective candidates. Job roles (or Performance Profiles as I call them) become easier to define. It’s easier to see what you need to achieve and who needs to achieve it when you have a clear strategy of who you want to be and where you want to go.
#6 Metrics: Who you are is what you measure. A SaaS software business measures different things from an IT consultancy. A high volume contract manufacturer measures different things from a niche, high margin, low volume, materials testing equipment manufacturer.

Your business is either remarkable or invisible. Your choice.

Write to Ian.smith@portfoliopartnership.com

 Tweet

I didn’t read this book I consumed it. So many great case studies illustrating the power of habit.

How Habits Work - Charles Duhigg, a New York Times journalist explains precisely how habits work, why we need to aware of the signals, and how to change them to achieve improved performance, achieve sporting success, drive company turnarounds, sell coffee. The key ingredients to every habit: a cue, a routine and a reward. Every morning my cue at 6am is an alarm, my running gear is ready to go, my routine is a 6 mile run and my reward is a feeling of achievement, a low pulse rate and plenty of energy.

Once habits form they become habitual. You crave them. You can insert a different routine into the habit loop but once the loop is formed the process continues. The secret is inserting the best routine and creating change in your life.

Case Study 1 – Alcoa
Paul O’Neil was a bureaucrat, a creature of Washington, sharp, high achiever but not a turnaround guy. So when the packed Manhattan ballroom in 1987 crammed with shareholders, analysts and the press, awaited the new CEO of Alcoa, Paul O’Neil, there was a certain tension in the air. Alcoa Aluminum Company Of America had made misstep after misstep and shareholders needed to hear a plan of action to articulate a better way forward. He opened his speech with,” I want to talk to you about worker safety. Every year, numerous Alcoa workers are injured so badly that they miss a day of work. Our safety record is better than the general American workforce, especially considering that our employees work with metals that are 1500 degrees and machines that can rip a man’s arm off. But it’s not good enough. I intend to make Alcoa the safest company in America. I intend to go for zero injuries”. You can imagine the confusion in the room! What he had delivered was the beginning of a Keystone Habit – a fundamental belief system that would transform the company. When Paul O’Neil retired in 2000, the market capitalization had grown during his reign by $27 Billion, the stock had risen to five times the 1987 level and the companies worker injury rate had fallen to one-twentieth the US average. He had disrupted the habits of an entire workforce around one thing. He knew it would create a chain reaction of good things, of good habits.

Case Study 2 – Fabreze
Fabreze gets bad smells out of fabrics was the tagline. Who wouldn’t want to achieve that? Sales were in the pan, going nowhere. As they dug deeper into the research they realized there was no habit being formed in households around Fabreze. Who wants to admit they have a smelly house? They needed to create a craving. As they studied many users of the product a breakthrough occurred. One lady swore by Fabreze. Show us how you use it the researchers pleaded. As she cleaned the house filled with the odours of her teenage boys, she finished her routine with a blast of Fabreze. “Spraying feels like a mini-celebration when I’m done with a room.” The researchers built on that, added even more perfume to emphasize the smell at the end of the process and developed a new marketing campaign around cleaning life’s smells. They had established a habit loop: cue, cleaning the house, routine, spraying Fabreze, reward, the Fabreze smell after cleaning. They had built a craving for that smell. Even when Fabreze ran out some households would spray perfume just to get that nice smell after cleaning.

It’s a great book well worth a read and maybe it will help you change some of your bad habits or allow you to inspire others to change their habits.

Write to ian.smith@portfoliopartnership.com

 Tweet

Book here Business Fundamentals Bootcamp IV.

Theme  -  “Growth Through Innovation”.

My session is entitled:  Defining Your Unique Strategy & Executing an Operational Blueprint and will be at 2.35pm.

Previous attendees typically run businesses in the $1m to $100m sales range.

The curriculum is tactical in nature, providing expert guidance; tools and takeaways that business leaders need to execute successfully and grow their business. The event concludes with a networking reception for participants and presenters.

I’d love to see as many friends there as possible. Attendance tends to be oversubscribed and is capped at 120.

All attendees are given the use of an iPad for the day to follow all the sessions!

See you there.Tweet