The Importance of Recognizing Your Employees

You should be doing it everyday.

Contributed By:
Caren Cobukcu
This story originally appeared on Personal Branding Blog

Every human being wants to be recognized and appreciated for the work they do because they like to see the reward of their efforts. However, managers often wait until the annual performance review day to give their feedback and show recognition. Managers shouldn’t wait for that one day of the year to recognize their employees. Instead, they should recognize them every day. This is only possible, if employee recognition becomes part of a company’s culture. It is recommended that every company make employee recognition an essential part of its culture. Here are some reasons why. 

1. Lowers employee turnover 

When employees feel recognized, they tend to stick around longer and therefore, employee turnover decreases. Correspondingly, recruiting and training a new employee costs decrease. There are both foreseeable costs of replacing an employee as well as unforeseeable costs because it takes three to six months for a new employee to get used to their role and become as productive as the previous employee.

2. Increases employee happiness

When employees are recognized, they become happier and as a result, their productivity increase. When they are more productive, they do better work and should be rewarded. This is a constant loop. Productive employees mean more successful jobs and more successful jobs mean earning more money for the employer, so it is a win-win situation for everybody. Also, employees do not usually quit jobs but rather quit managers. If their managers make them feel valued, they become happy and do not think about quitting their jobs.

3. Increases employee engagement

Companies often complain about poor employee engagement and look for ways to overcome this problem. In order to increase employee engagement, a well thought-out recognition and appreciation program might be a solution. A powerful program increases employee engagement as well as employee morale. Hence, employees feel valued and valued employees are more satisfied with their jobs.

4. Increases trust

Recognized employees feel more human and worthwhile. Hence, this affects the trust of employees because if a company cares about their employees and puts them first, then trust to this company increases. When employees trust their workplaces, they become more committed and embrace their workplaces. Also, if a company has remote employees, building trust becomes more difficult due to the challenges of working remotely. Therefore, managers can build trust among their employees by showing them that they see their contributions and care about their needs.

7 Key Selling Habits All Sales Professionals Must Develop

Improving these seven habits is the key to increasing your sales, your business revenues and your profitability.

Contributed By:

Brian Tracy (VIP Contributor)

Source: Entrepreneur

The following excerpt is from the Brian Tracy’s book Million Dollar Habits. Buy it now from Amazon | Barnes & Noble | iTunes |IndieBound

There are seven key selling habits you must develop as a sales expert. They are prospecting, establishing rapport, identifying needs, presenting solutions, answering objections, closing the sale and getting resales and referrals. They proceed in order. Habitually thinking about each of these seven elements of the sales process, and how each of them could be improved, is the key to increasing your sales, your revenues and your profitability.

1. Find ideal customers

To succeed greatly in sales, you must spend more time with people who are better prospects. You must prospect and look for new business 80 percent of the time. You must be prospecting morning, noon and night. You must never relax in your prospecting efforts until you have so many custom­ers that you don’t have enough time left in the day to sell and satisfy all the people who want to buy from you.

2. Focus on relationships

The second habit for sales success is the habit of focusing on the rela­tionship before anything else. You should focus on establishing rapport, trust and credibility with each prospect from the first contact. The most successful salespeople take as much time as necessary to establish trust with that client. They ask good questions and listen closely to the answers. They seek to understand the customer’s situation and needs before they make any attempt to talk about their product or service.

The rule is this: “If the customer likes and trusts you, the details won’t get in the way of the sale. If the prospect, however, is neutral toward you, or even worse, negative, the details will trip you up every step of the way.”

Related: 2 Negative Habits You Must Break Now

3. Identify needs clearly

The third habit of top salespeople is that they make a habit of asking questions and identifying the real needs of the prospect relative to what they’re selling. Most prospects aren’t aware that they can improve their life or work situation when they first meet you. This is the reason prospects often say things like, “I’m not interested,” or “I can’t afford it,” or “We’re quite happy with our existing situation or supplier.” The more questions you ask about the customer’s situation, and the more you link your product to those needs, the more open the customer becomes to learning about your product or service and eventually buying it.

4. Present persuasively

The fourth habit developed is the habit of making excellent, logical, well-thought-out presentations of the fea­tures and benefits of their product. If you’ve identified a prospect who can benefit from what you sell, established a comfortable level of trust and rapport and identified their needs clearly, the presentation is where you show the customer why it makes excellent sense for them to act on your recommendations.

5. Answer objections effectively

The fifth stage of excellent selling is the habit of answering objections and resolving concerns in a confident, competent manner. You do this by thinking through all the objections that a qualified prospect might make, then develop logical, complete answers to each of these objections so you’re prepared if and when they come up. The very best sales professionals have developed completely clear, “bulletproof answers” so that when objections arise, they can be put to rest quickly.

6. Ask for the decision

The sixth part of selling is developing the habit of asking the customer to make a buying decision. No matter how good your presentation or how high the level of trust and credibility that exists between you and your customer, there’s always a moment of stress or tension at the mak­ing of a buying decision. Your job is to move quickly and professionally through that stressful moment by asking for the order in a confident, professional manner and then wrapping up the sale.

Related: The 7-Step Formula for Goal Setting

The very best sales professionals plan their closes in advance. They watch for buying signals from the customer, ask questions to make sure there are no lingering objections and then ask clearly and straightforwardly for the customer to take action now.

7. Ask for resales and referrals

Finally, top sales professionals develop the habit of asking for resales and referrals from each customer. They know that every person they talk to knows at least 300 other people by their first names. They there­fore give good service to their customers and ask for referrals to similar prospects.

The habit of thinking in terms of resales and referrals is the key to high income and high profitability. The most successful salespeople and companies have high levels of repeat business and a continuous stream of new customers that come from referrals from their satisfied customers.

4 Ways to Make It Easy for Customers to Give You Their Money

Create more sales with these simple tips.

Contributed By:

Carol Roth

Source: Entrepreneur

Marketing and selling are part art and part science, but sometimes, the simplest of tactics are truly the most effective. If you want to grow your business, make it easy for current and prospective customers to give you money. Here are four simple tactics to do so.

1. Contact them.

Far too many businesses are reactive when it comes to customers. Businesses wait around for the customers to contact them about purchasing their products and services instead of proactively reaching out.

My old cleaning service that I used prior to moving always waited for me to contact them for an appointment. Given my busy schedule, my home was often way overdue for their services by the time I got around to make an appointment. Now, my current cleaning service owner texts me regularly, which forces me to make the appointment a priority. This means that my new cleaning service probably gets almost double the revenue from me each year that my old one did.

My Gyrotonic teacher does even better. He doesn’t let me leave his studio without making sure that I book my next appointment. Again, if it were up to me to fit the time to contact him into my schedule, he would certainly see me less often.

If you own a spa, book the next appointment before the customer leaves. If you are an estate lawyer, contact your clients about reviewing their estate plans to make sure they are up to date. Being proactive with your existing customers can lead to a significant uptick in revenue and be helpful to managing your clients’ time in the process.

This can work with prospects, too -- offer to book a free or discounted service for them when they inquire for information before finishing the correspondence, whether it’s by phone, text, email, in person or in another format.

2. Create pre-payment plans.

If you have the ability to create bundles or plans for your services upfront, getting a commitment and prepayment not only can help your business’s cash flow, but it can also increase your clients’ utilization of your services. For example, I outsource my information technology (IT) support to a company who sells prepaid blocks of time for their services. This encourages clients, like me, who know they already have some support coming to use it; and, as a bonus, they don’t have to track the customers down for payment after the fact.

3. Upsell.

Existing customers already know you and your business. They hopefully like and trust you, too and for those who do, it’s fairly easy to find ways to get them to purchase more product just by asking for it. My IT support vendor, mentioned above, started working with me by migrating my email to the cloud. From there, it was easy to talk to me about purchasing general IT support, cloud back-up services and more.

Make sure that you are reviewing your customers’ purchase history to see what additional products and services you can be marketing to them, as add-ons or otherwise. If you don’t have ancillary products and services, poll your customers and clients to find out what services and/or products they might want from you that can help you grow with your existing customer base.

And, of course, borrowing from the advice above, don’t wait for them to come to you -- reach out to tell them about it.

4. Don’t turn away a sale.

Finally, be smart about how you respond to inquiries from prospective and existing customers, which is a fancy way of saying don’t forget to do it! I have a client who was dying to buy new accounting software for his multi-million dollar business, but he couldn’t get a rep to return a call. I have another client who tried to purchase digital rights management software, but couldn’t get anyone to return his inquiries. I have yet another client who was talking to a business development manager at an ecommerce company about an opportunity, who ostensibly fell off the face of the earth.

You get the picture -- your marketing efforts are useless if you drop your leads before converting people into customers (not to mention if you forget to continue to nurture your customers and lose them).

Customers have needs that are addressed by your products and services, so don’t make it hard for them to give you money and you will find your business rewarded in the process.

7 Closing Strategies to Double Your Average Sale Size

Your success depends on closing bigger, better deals. Put your time and energy into prospects with the power to make large investments and introduce you to others who can do the same.

Contributed By:

Marc Wayshak

Source: Entrepreneur

Do you want to be in the top 5 percent of salespeople? Of course you do. Most in your profession think success means closing more deals -- but that’s simply not true. In fact, average salespeople often close more sales than the richest salespeople do. That’s because the top 5 percent of salespeople know how to increase their average sale size, enabling them to make much more money on far fewer deals.

The key to reaching the top level of sales is consistently closing bigger sales. How? By targeting massive organizations with the need and budget for larger investments. You can start by taking concrete steps to double your current average sale size. Check out these seven closing strategies for landing bigger clients, doubling your average sale size and dominating the competition in your industry.

1. Get over your fear.

Many salespeople are simply too scared to sell to huge companies. If this sounds like you, you may be surprised to learn that big organizations can actually be much easier to close than smaller ones. After all, these large companies face the same problems as your small customers do, just on a bigger scale. This means they need a bigger version of your solution -- and they have the budget to match. Get over your fear, and you’ll quickly see that big companies don’t bite.

Related: Tim Ferriss Says You Have the Wrong Idea About Fear, and It's Killing Your Dreams

2. Stand apart from the crowd.

High-level prospects hear from an average of 10 salespeople every day. If you do what everyone else is doing, you’ll never get through to them or earn their trust. To double your average sales size, you must be intentional about standing apart from the crowd in your industry. While others pitch, you should ask questions. While others are enthusiastic, you should be low-key and genuine. While your competitors focus on their products, you should focus on your prospect’s deepest frustrations and show how you can solve them.

3. Stop selling to low-level prospects.

When you first call on an organization, it’s easier to connect to low- or mid-level managers. It’s easier to talk to these low-level prospects, and you’re more likely to set more sales meetings with them. Although you'll feel safer selling at this level, you’re only harming your close rate and decreasing your average sale size. That’s because low-level prospects simply don’t have the power or budget to tell you “yes." They’re not the decision-makers. If you want to increase the size of your sales, stop selling to prospects who lack the budget to invest in your solution.

4. Sell to decision-makers.

One of the challenges of selling to big companies is the glut of mid-level managers with confusing titles. This can make it difficult to determine who the real decision-makers are. It’s a best practice to head straight to the top of the food chain and sell to directors, vice presidents, and C-level executives. They have the power and budget to say “yes” to your offer. Don’t worry about selling too high. If someone refers you back down the chain, you’re still landing an introduction to the right person -- by his or her boss, no less. 

5. Stop cold-calling.

Cold calls are miserable. Trying to connect with people who've never heard of you is not only challenging, it’s also extremely ineffective. Fortunately, there’s a better way to connect with prospects: a sales-prospecting campaign. Plan your calls, letters and emails as follow-ups to a valuable letter or package you send via FedEx. This could be a special report, unique sample or company analysis. These intentional, repeated touches over a series of months will set you up as a familiar name by the time you actually get your prospect on the phone. When a huge sale is on the line, you can afford to invest time and money to catch a single prospect’s attention.

6. Know the decision-making process.

If you’ve closed only small deals at small companies in the past, you might be accustomed to working with just one or two decision-makers at a time. In large corporations, the decision-making process can be much more complicated. One of the biggest mistakes salespeople make is failing to understand the decision-making process. Get a grasp of this early on, and you can stay in front of the right people, build value for them and close your sales at higher prices.

7. Leverage sales for introductions.

When you close one large sale at a big organization, don’t stop there. Ask new customers for introductions to others in their company or network who could benefit from your offering. You have nothing to lose by asking for introductions, but failure to do so will cost you massive opportunity and revenue. Successful salespeople understand this, and they never miss the chance to leverage a big sale for more valuable introductions. This is the single-most effective way to consistently close bigger sales.

Have you been working to close more sales when you should’ve been focusing on bigger sales? Use this free Ultimate 3-Step Prospecting-Call Script Template to put powerful sales advice into practice and set yourself on the path of real success.

5 Tips for Finding Your Ideal Customers Instead of Waiting for Them to Find You

Contributed By:

Aman Naimat

Source: Entrepreneur

The power of the Internet makes many startups think they can just put their information online and let the customers find them. But this is like being a wallflower at a school dance, watching everyone else pair up.

Unless you have the leading SEO expert working on your team, there’s a good chance your startup will run out of money before your customers discover you. Decision makers are inundated with LinkedIn invites and emails. It’s nearly impossible to get your message heard.

In today’s noisy, overcrowded marketplace, you can’t hope to be discovered. The best way to grow your business is to handpick your perfect customers and give them a call. In “Predictable Revenue,” Aaron Ross calls this “cold calls 2.0.” In the book, he shares how Salesforce targeted customer lists and doubled its pipeline -- even in a non-small business market. Succeeding with this method comes down to several factors.

For one thing, when you seek out and target the exact customers you exist to serve, you can focus your resources on leads that will result in more conversions. Focusing only on prospects with the potential to turn into paying customers is especially important when you’re in the startup phase, but it remains effective as your company grows.

Targeting your customers also helps reduce the conflict between sales and product engineering. According to Dave Kellogg, CEO of Host Analytics, post-sale “deficiencies” often occur because salespeople don’t have well-defined criteria for matching customers to products. When this happens, they’re likely to sell to customers who may not be a good fit for the product to begin with.

Avoiding this conflict is critical for scaling your business because these first customers will define your brand and attract your next set of customers. In fact, Edelman found that 84 percent of all B2B deals stem from referrals from existing customers.

Once you understand the benefits of picking your customers (and the risks of waiting for them to find you), you need to take action. Here are five strategies for picking your customers:

1. Qualify, qualify, qualify.

Think of customers as long-term investments. You want to know that a year from now, they’ll really need your product and you’ll still be adding value for them. This is especially true if your business is SaaS-based.

2. Analyze their network.

Don’t just determine what companies do and how you can sell to them. Look at their networks -- their partners, competitors and customers -- to determine their potential for referrals. Companies with large networks have the potential to present you with more business opportunities.

3. Focus on growing companies.

Theoretically, your product can help a losing company. But unless you’re a company that makes huge profits investing in sick businesses, focus on businesses with a future of growth because that’s your future, too. IBM and Oracle didn’t become successful by focusing on dying markets.

One trick for figuring out whether a company is growing is to go to the career section of its website. If the company is hiring at a higher rate than its peers, that’s a great sign.

4. Pick customers who close.

It’s great to aim high, but don’t waste time on unrealistic customers who will never convert. Some salespeople have prospect lists that are all Fortune 500 companies even though they’re still selling to startups. It’s good to have two or three aspirational accounts, but 80 percent of your list should be companies that will actually do business with you.

5. Don’t be fooled by engagement.

Unless you’re Facebook, engagement doesn’t equal revenue. Placing too much emphasis on engagement just wastes resources on people who find your product valuable, but not valuable enough to pay for it.

If you want to build a strong customer base that will continue to bring in revenue for years to come, be proactive about seeking out the customers you want. Some startups seem to think they’re the star quarterbacks who will naturally attract everyone, but in reality, they’re the wallflowers standing around awkwardly waiting to be noticed.

Don’t be the wallflower. Get out there, and find the people who want to dance with you.

The Fastest Way to Find New Customers

Tap into your customer base by piggybacking on established businesses with similar target markets.

Contributed By:

Brad Sugars

Source: Entrepreneur

Some years ago, I overheard a debate between two friends about the name of a startup business. "It's a good name," said one friend to the other, "but I'm not sure it's the best name." You could say the same thing about the techniques typically used to attract customers to a new business. Traditional strategies like networking and mailings will do the job, but they won't do the best job.

If you're a startup, the fastest way to get the cash registers ringing is a little-used method that involves forming "host-beneficiary" relationships with established businesses that cater to a target audience similar to yours. Then you promote yourself to their database with a special offer presented as a gift from the older business.

The beauty of this arrangement is that the startup (the beneficiary) can instantly reach large numbers of highly qualified prospects with the tacit endorsement of the established business (the host). The host is willing to participate because it's a way to reward loyal customers without incurring any costs. The rookie gains new customers, while the veteran gains goodwill.

Women's Clothing and BMWs
One startup that successfully used this technique was a high-end women's clothing boutique. The store arranged to give a free silk kimono to every female customer of a local BMW dealership who brought in a letter sent by the dealership offering the gown as a gift for their past patronage. The kimono had to be picked up at the boutique.

More than 600 women responded, picking up $100 kimonos that cost the store just $16 apiece. Those 600 women spent an average of $400 on other merchandise during their initial visit. Do the math, and you'll see that the startup spent $9,600 to generate some $240,000 in sales--and, not incidentally, to begin building its own clientele.

Six Steps to Success

Host-beneficiary marketing is actually a simple and relatively inexpensive process that will deliver solid results if you follow a few basic rules:

1. Precisely define your target audience. "Women 35 to 55" might be a start, but it's not enough. Create a detailed profile of your target customer. The more segments you can identify, the more potential hosts you can approach.

The women's clothing boutique that marketed to BMW owners, for example, determined that their likely customers drove certain types of cars, patronized a certain class of hair salon, belonged to a health club, and were likely to play bridge. A birdseed store might come up with a list that includes consumers who shop at outdoor equipment outfitters or are affiliated with local conservation groups.

2. Identify local businesses that serve the same market segments. That way, you can not only bring people in the door for your initial offer, but also increase the likelihood that they'll return to give you repeat business.

For a cigar store, logical host partners might include better men's clothiers, upscale shoe stores, luxury car dealerships and country clubs. And don't forget non-commercial organizations like Rotary or Kiwanis.

3. Develop a clear offer for each prospective partner. Come up with a free or deeply discounted product or service that has a high perceived value for the consumer with a low dollar cost for you.

One new computer support business offered a voucher worth two free hours of computer repair to the small business clients of a local accountant. A jewelry store offered free jewelry cleaning to clients of a hair salon. A marketing consultant offered a free seminar on how to run sales to one local newspaper's advertisers. A framing shop offered free photo framing to a photographic supply store's top 200 customers.

4. Pitch the plan, highlighting the benefits to the host business. Emphasize that it's a way for the established business to reward their customers at no expense and with virtually no effort. It's also a way to reach out to customers without overtly trying to make a new sale.

5. Supply a letter for the host's use. Providing a draft "offer" letter that can be sent to the host's customers on the host's letterhead will help put the plan into motion quickly. It will also show the partner how easy it will be for him to participate.

Some businesses will allow the letter to be inserted into their monthly invoices or newsletters at no cost to you. Others will charge or require that you pay for a separate mailing. It's a small price to pay for access to the host business' customer base.

6. Develop a strategy to convert redeemers to repeat customers. This, after all, is your long-term goal. For the women's boutique that gave away a kimono, the strategy was to encourage browsing and lure shoppers into dressing rooms to try the merchandise. For one new bakery that gave away a chocolate éclair, the approach was to hand out a buy-five-get-one-free VIP card with the free pastry.

Whatever the specific plan, the host-beneficiary method is the single most effective way to quickly attract a critical mass of qualified customers to a new business. Instead of beating the bushes for customers with individual referrals or scattershot ads, you can tap into a targeted group of consumers en masse to jumpstart sales.

Best of all, you're piggybacking on the success of another entrepreneur who has spent years building a solid customer base. In many ways, this eliminates the need to reinvent the wheel. For a startup facing so many other challenges, it's just smart business.

The Bodega Effect: Lessons In Branding From the Rise and Fall of a Startup

Contributed By:

Tim Gosman

Source: Entrepreneur

We’ve all heard the old adage, there’s no such thing as bad publicity. Tell that to the recently launched Bodega, a startup supplying small personal “stores” within an apartment house or business, that would offer a tech-driven, automated replacement for the ubiquitous family-owned corner stores that have become an urban icon. For an ambitious company, the sort of PR that Bodega initially received would see its founders high fiving. Instead, the backlash that has accompanied its recent launch could see the startup boycotted before it’s even really begun.

The internet enjoys being outraged, and no matter how brilliant a product or well-positioned a brand, some people will always sneer. But for two ex-Googlers to have struck out so badly is surprising. They should know the social mores of the 'net better than most. The outrage around Bodega has been trending on Twitter for days and there’s no telling when it will die down. When you’ve distracted the internet’s ire from its favorite billionaire president, you’ve gone really wrong.

But, within this failure, there are lessons for every startup about branding and the need to get it right. By better understanding the challenges inherent in building a brand, startups can avoid the Bodega backlash. Their launch is a perfect example of a tone-deaf brand catapulting a perfectly reasonable and inoffensive product proposition into public enemy number one.

Pick your enemy well.

When you’re building a brand, it’s often helpful to identify an enemy. Something that your brand is standing up against, a convention that you think could be improved or a pain point for consumers that you believe could be solved. The problem with Bodega is that it set its sights on entirely the wrong enemy.

When you boil its proposition down, it’s essentially a smarter vending machine. One that uses data analytics to ensure it’s stocked with the items that its most frequent users want the most. Now, if the company had decided to put vending machines on notice, to offer a healthier, better-curated alternative to machines full of rock solid granola bars and neon potato chips, the response to the brand would likely have been much more positive. A convenient cupboard stocked full of things people actually want to eat, plus a few convenient items like razors and toilet paper, would meet a clear customer need.

But, Bodega didn’t choose that route or that enemy. It chose to attack a quirky, cultural institution for which people clearly have a great deal of affection, and in so doing managed to make itself the enemy instead.

The appropriation of the cat -- the beloved mascot of the bodega (see bodega cats of Instagram for many wonderful examples) -- for its logo seems like the final straw. For many, it was an almost a gleeful middle finger to the mom-and-pop institutions that the budding tech companis is trying to run out of business.

At a time when New Yorkers are getting increasingly frustrated at their streets becoming copy-and-paste clones of each other, filled with big brands that lack any connection to the community, the bodega represents one of the last entities that captures a unique sense of place, the one non-corporate corner of the neighborhood with real character.

Startups are used to tackling challenges and taking risks in disrupting the status quo. But, they should also take this branding lesson to heart. If you want to build brand affinity by pioneering a "better way," pick an adversary everyone will be happy to gang up against.

Do the right research.

Bodega rightfully anticipated that its appropriation of the Spanish word might face some challenges, so it did some research. As the founder explained, “We did surveys in the Latin American community to understand if they felt the name was a misappropriation of that term or had negative connotations, and 97 percent said ‘no.’ It’s a simple name and I think it works.”

Normally, this would be a good example of a brand doing its part to understand its audience. Startups should always be encouraged to dig in and do their homework. But, it’s important that brands do the right kind of research, not just collecting impressions that validate pre-existing biases. This is a serious danger in the startup space where product-focused teams find themselves branding in an echo chamber. The result is often a mismanaged identity, completely divorced from the realities of its audience.

In Bodega’s case, I’d question how rigorous the research was to begin with. Why did it speak only to the Latin American community, rather than the communities at large that it wants to actually use the service? If the ambition is for the service to become ubiquitous, then surveying a true cross-section of students, workers and gym goers in both test cities would have been a better read on the likely response. After all, you don’t have to be from a specific culture to be offended by its inappropriate appropriation.

Bodega eventually agreed, saying on its blog, “It’s clear that we may not have been asking the right questions of the right people.” Startups should take note. Not all research is equal valuable.

Know when and how to start over.

To wheel out another cliche, today’s news is tomorrow’s trash, so the Bodega founders could simply lie low and wait for the internet to turn their attention back to “The Donald.” But, while the name and the logo remain, the brand might find it hard to shake the associations of appropriation that have angered so many, resulting in customers unwilling to interact even if they want that protein bar or bag of pretzels.

There is definitely a vogue for more abstract names and identities for startups, such as Kabbage and Lemonade in the fintech space. This is due largely to the difficulties of trademarking anything remotely descriptive. But, it’s also fair to say this irreverence can make it harder for brands to attract opprobrium. Bodega probably would have been better off exploring this more abstract approach.

The good news is, even for brands like Bodega that do make mistakes, a full mea culpa is still a viable approach. The internet may forgive and forget over time. Then, the company can concentrate on a swift rebrand that puts another, less beloved enemy in its crosshairs.

How to Build a Startup Ecosystem

If you're the only startup in town, it's going to be tougher than if you're launching in a healthy startup ecosystem.

Contributed By:

George Deeb

Source: Entrepreneur

Chicago’s startup ecosystem is exploding. But so are others all across the country and around the world, with varying levels of success. I wanted to talk about the mix of ingredients that are needed to make a startup ecosystem thrive over time, so leaders in your local communities can have a blueprint to follow to propel your local startup ecosystem, and hopefully, your own success in the process.

The most important ingredients.

Access to Great Ideas. Great ideas turn into great businesses. Think building “platforms” over “features,” or “wisdom” over “widgets,” or “painkillers” over “vitamins.” Startups are hard in all cases, might as well be working on really big ideas.

Access to Talent. Great entrepreneurs, preferably serial entrepreneurs that have learned from prior mistakes, are ultimately going to dictate the success of their businesses, and in turn, the success of the ecosystem.

Access to Capital. The best ideas and the best talent are useless without the capital to fund their vision. If that capital is local, great; investors like to invest close to home. If that capital is located in another city, that is also great, provided investors in those towns are willing to deal with travel (which they often don’t).

It is critical that the capital be available to support each stage of development, from seed to early to growth stages of your business. Having seed stage, but not Series A or Series B stage, is a recipe for a likely “flame-out” of that startup, when they hit the wall in that level of their growth.

Access to Customers. To me, this is the most important piece. Customers drive revenues. Revenues impress investors. Investors fund growth. Growth leads to big exits. Big exits leads to a robust ecosystem. This often means tight partnerships between early stage ideas with later stage companies to buy those services (ones who are supportive to the local startup community).

The key players.

Entrepreneurs. Duh, you need experienced teams running the startup businesses. With an equal balance of needed skill sets -- from strategy, to marketing, to technology, etc.

Mentors. First time entrepreneurs need to be able to ask questions of experienced leaders, to help get up the learning curve without making the same mistakes of their predecessors.

Investors. Whether these are individual angels, organized angel networks, venture capital firms, private equity firms, family offices, corporations or other funding sources doesn’t matter. What matters is the money is flowing from whoever can cut the checks for that stage of a business’s growth.

Incubators. This category picks up everything from shared office spaces for startups, all the way up to formal startup accelerator programs with formal educational curriculums. The point is, entrepreneurs can learn from each other when they are in close proximity to each other.

Universities. A lot of the biggest business ideas are born from the research inside universities. Having a healthy technology transfer process for these ideas to be monetized by business leaders is key. And, university professors need to know: It is perfectly acceptable to try and monetize their ideas, at the same time they are trying to win a Nobel prize.

Corporations. The big companies in town help in many ways. They invest through corporate venture capital funds. They become potential customers of new local startups. They have pain points of their own that a local startup can solve for them. They are often the exit for startups that have gotten large in size.You need a really healthy interaction between the startups and corporations working towards a common goal.

Associations/Events. There are many groups in town that help organize and propel the ecosystem. This could be industry trade associations, venture capital associations, entrepreneur networking groups, chambers of commerce, economic development groups, etc. Leverage these groups of like-minded people at their big annual events or leverage their tools (e.g., job boards on their websites).

Government. Whether it is at the city, county or state level, your local government can play a very important role. That could include providing tax incentives for startups to launch in their city, tax-free profits on any capital gains in a startup (to help stimulate investment), passing ecosystem friendly laws (like free access to the internet), or establishing venture capital funds with a portion of their treasury.

Service Providers. The lawyers, accountants, bankers, recruiters, agencies, advisors and consultants in your community all play a role. The more experienced they are with startups, the better advice they will bring to the ecosystem.

Optimal ownership and economics.

Spread Equity Deep. Most entrepreneurs concentrate equity into only a couple people at the top of the organization. It is better to spread equity deep into other employees, as well. Why? Because if employees have a vested interest in the business, they will work harder towards hitting the goal. And, when the company sells for $1 billion, it creates hundreds of multi-millionaires that have new-found funds to start their next startup, powering the ecosystem to the next level.

Serial Exits. Selling companies for big returns impresses investors. But, often times a first time entrepreneur will see a $50 million sale as “big money,” and sell too early to put some cash in the bank for a rainy day. But, a second or third time entrepreneur has already banked cash from their first exit, and now they are in a position to “roll the dice,” walking away from a $50 million sale in hopes of a $500 million sale down the road.

Reinvest Returns. Money that simply goes into the bank account, or into safe real estate investments, does not help the ecosystem. The money needs to round-trip back into the community. So, if you sell for $100 million, hopefully a good chunk of that is funding other startups in the ecosystem.

Shoot for the Moon. Many investors are simply too conservative for a startup ecosystem to be successful. Silicon Valley prides itself on “failure as a badge of honor,” as the lessons learned in one bad startup will apply to the next good startup. If you are too conservative, trying to cross potential “strikeouts” off your list, you are most likely crossing off potential “home runs” at the same time.

Key assets and initiatives.

It Takes Leadership. It takes a couple cheerleaders at the top that are going to “plant the flag” to have everyone rally around those goals for the community. Preferably, somebody that can put their money where their mouth is, and can lean on their deep rolodex of key relationships in your region (e.g., the governor, the mayor, the local billionaires).

Leverage Local Strengths. Figure out what your region does better than others, and focus your efforts around those industries or skills. For example, New York would be a great place for financial startups and Los Angeles would be a great place for entertainment related startups, given the high concentration of experts in each.

It Requires Startup Density. It will be really hard to build a robust community in very small towns. There simply isn’t enough activity, breadth of industries or depth of expertise in any one industry to be effective. So, either live in a town big enough to support an ecosystem, or prepare for a lot of travel between a bunch of smaller regions that have been aggregated into one community.

Collaborate Across Regions. Don’t think a startup ecosystem is isolated to your city. The best startup ecosystems feed off each other. Think about the collaboration happening between New York and Boston startups, given their close proximity to each. Or, between Detroit and Germany, because they both serve the auto industry, as examples.

Publicity Helps. The rest of the country needs to know what you are up to. It should be less about your desire to build an ecosystem and more about the venture capital flowing into your region, or big exits being realized at big valuations. So, celebrate your successes, and put those success stories locally “on display,” or nationally “on the road.” That will attract investors and talent wanting to check it out.

Progress Must Be Measured. As with any business endeavor, you must have good measurement with which to manage it. Quantify key metrics like the amount of capital raised, investor value created, companies formed, jobs created and material exits in your market. Shoot to have those metrics improve year over year.

It Can’t Be Forced. The community needs to share a common goal. The goal of building a robust community can’t simply be embraced by a few, to be forced upon others; it has to be embraced by everybody participating in the community for it to be successful.

It Takes Time. Don’t expect miracles overnight. Ecosystems are not built in years, they are built over decades. That is why Silicon Valley’s startup ecosystem is as big as it is; they have literally been working on it since the 1970’s, to become a fine-tuned machine after 40 years of optimization.

Related: A Brief History of Silicon Valley, the Region That Revolutionizes How We Do Everything

Hopefully, you now have a better understanding of what it takes to build a robust startup ecosystem. You can’t do it by yourself; you must collaborate as a symbiotic community with a shared set of common goals between people that are equally happy helping others, as they are at helping themselves. Layout the blue print for your city, let it percolate for a couple decades and hopefully good things will come.