We held our quarterly meeting this past week, and with it came some great discussions. Most of these conversations were centered on our direction and reaching our Big Hairy Audacious Goal, as introduced by Jim Collins. One major point that came up: How do we get where we want to go when we’re consumed by our day-to-day work activities?

We also discussed the Flywheel concept, as Collins examines in “Good to Great!” I realize that in business, we all want to get there and get there now! However, building a business is more like pushing on a huge 20 ton flywheel, 100 feet in diameter, and 10 feet thick. The flywheel represents your company, and it is at a standstill when you start out or maybe even when a big change hits you.

It takes a tremendous effort to get it to move an inch. With proper alignment as well as continuous effort and energy, you get it to spin one time, and then another and another. Then at some point, you break through with enough momentum that it spins around and around without any additional effort. This is the flywheel effect in action. It takes time to make it happen, but when it does, watch out!

There has been lots of buzz around the quick success of Instagram, but this isn’t
the norm. As the research from Collins pointed out, it takes about 25 years before before a good company begins the journey to turn into a great company. It’s faster to connect to a marketplace today with the internet and social media than it has been in the past, but it still helps me to be reminded of this, and I guess it may help you also.

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When we go out into the world and try to connect with others and tell them about growing our business, we tend to do it in a way that it is all about us rather than about them. We say how great, wonderful, and life changing our product or service is going to be for them. The problem with this is that they don’t care about all the features your product or service offers. They want to know how it will specifically help them solve their pain points.

In a meeting earlier this week, my business associate Alex Lavidge boiled it down to three key issues. He asked whether it will:

1) SAVE ME TIME

2) SAVE ME MONEY

3) GROW A NEW REVENUE STREAM

When you think about it, you’ll find this is so relevant to how we approach most of what we do, especially if we are business owners. Aren’t these the things that really motivate us to take action? If someone is coming into your business and says they can really save you a lot of money, does this not peak your interest? If they tell you their new widget will increase your sales by 10%, wouldn’t your eyes leave your computer screen and look them in the eye?

Conversely, when we think about what activities we are going to undertake for the day, we should focus most of our time and effort on these actions. Aren’t we ultimately working toward one of these goals?

What are you doing or who are you talking with that will save you time, save you money, or grow a new revenue stream?

In previous blogs, I have shared my admiration for Robin Sharma, best-selling author and business coach, and when I viewed some of the mostly highly watched videos from him, I wanted to share one that most resonated with me. The video “How Remarkable Entrepreneurs Build Winning Teams” had a great message and had accumulated almost 18,000 views.

I have been working for years to build a great team, and I am excited about the one that is in place today! We have gone through different team members, and it seemed to be an evolution on the talent that we were attracting. Today, the team is full of highly skilled and dedicated people that want to give their all to make the company improve and grow.

Here are the 5 things entrepreneurs do to build a winning team:

1) Appreciation – show appreciation and give praise. A gallop study said that the #1 reason companies lose talent is that employees don’t feel appreciated. I am thankful for my team and could do more to share that with them.

2) Belonging – create a sense of belonging. People like to feel like they belong to a special community. Our team just seems to like each other by the way they joke and laugh so often.

3) Develop Your People – grow their talents, challenge them to be better, and take them where they want to go. Mentor and help them be better. We ask them weekly what they have learned, and we pay for educational programs for our team.

4) Celebrate Your Team – celebrate the big things but also the little things that happen along the way. We have had little celebrations such as going to lunch together and even a coupon book that can save over a $1,000 to local retailers. We could do more to celebrate our team and will work on this.

5) Communicate a Compelling Purpose – share a common goal and passion. People like to feel like they are making a difference. Here at Efficience, we believe that there is a better way to leverage technology in your business. We are passionate about creating life-improving solutions, such as more affordable mobile apps for small businesses, so they can connect with their customers and grow their business.

I know I could do more and I will work harder in these areas. What are you doing to help your team to be the winners you know they can be?

I have written many blogs, and for the most part, I talk about the opportunities in the marketplace, the people, the freedom, the places, and the experiences of being an entrepreneur. Rarely have I discussed the struggle and how being an entrepreneur can be downright difficult at times. This is part of the environment that you take up when you choose or, for some, are forced into this path. The allure of the business owner draws you in, but are you prepared for the reality that will inevitably follow?

Ben Horowitz, with the venture capital firm Andreessen Horowitz, reminded me of this in his recent blog entitled “The Struggle.” Yes, this is the same firm co-owned by Marc Andreessen, who started Netscape, which introduced one of the original web browsers. It is the same firm that invested $250,000 into Instagram and walked away with $78 million two years later.

You might think there isn’t much to struggle over as a successful business owner, but in reality, in order to get to that success, you experience “The Struggle.” This is a world that is dark and difficult, and it is one with which I am familiar, as are most entrepreneurs that have achieved any level of success.

Some of the comments that really resonated with me are as follows:

The Struggle is when you wonder why you started the company in the first place.

The Struggle is when you are having a conversation with someone and you can’t hear a word that they are saying because all you can hear is The Struggle.

The Struggle is when you want the pain to stop. The Struggle is unhappiness.

The Struggle is when you are surrounded by people and you are all alone. The Struggle has no mercy.

The Struggle is not failure, but it causes failure. Especially if you are weak. Always if you are weak.

The Struggle is where greatness comes from.

This is not a good place to be and can bring down the best of them. I have been there before and have even felt it recently. The economy and world situations are causing many to be in The Struggle. Business is not easy, and most are reluctant to spend when they can’t see past all the doom and gloom.

Ben explains that there are no answers to The Struggle, but he discusses several things that have helped him move forward. Share some of the burden; don’t put it all on your own shoulders. Realize that it will not upset your people more than you because nobody feels the effects more than the person most responsible. We both think that getting the most brains on the problem, the better. Remember collective intelligence.

This is a chess game and one that is multidimensional. You always have a move even when you don’t think there is one. Ben says to focus on the road like they teach you when driving a racecar because if you look at the wall, you will drive into it. You go where you are focused.

Another key philosophy Ben and I share: Stay in the game long enough, and you might get lucky. To say it another way, in the technological world in which we live, the answer that seems impossible today may turn up tomorrow if you stick around.

One thing that helps me is to stay present. This is not easy to do, but I find when I focus on my mistakes (and in the past, there have been many) or try to deal with what might come up in the future, I have removed myself from knowing that everything is alright in this moment. I think you are more open to the answers the universe brings you when you are right here right now, rather than when you are looking back or forward.

All the best deal with the Struggle. Remember, that is where greatness comes from.

I wrote a blog in July 2011 called “What Disruptive Technology is Sneaking Up on You?” I also wrote another one more recently called “Crowdfunding, the Savior for the Entrepreneur.” Interestingly, they have both been pulled together by the disruptive technology guru Clayton Christensen. Clayton spoke with CNNMoney for an article they featured on his involvement in crowdfunding.

As I explained in my previous blog, crowdfunding will allow companies to raise money with their social contacts for partial ownership in a company. You can raise a lot of money by asking for small investments from a large number of people. Think of this like a mutual fund that has lots of money to invest, but one individual investor may only put in $500 while another puts in $10,000. Crowdfunding gives the investor the opportunity to invest in people they know even if they don’t have large sums of money. The previous laws placed tight limitations on this.

Clayton pulls disruptive technology and crowdfunding together when he points out that crowdfunding has the potential to disrupt traditional financiers. He has invested in a platform that is being created to help bring together both the investor and the company trying to raise more capital.

As I’ve said before, I think this opportunity is going to be big! It will change the game for many people, most importantly the entrepreneur. Ideas and opportunities that would have never gotten off the ground before will now have a better chance at a good start and could become job creating machines.

Now, the important ingredient for anyone with aspirations to grow and get funding is a strong social network. The theme we had back in my investment days was connectivity. We invested in companies that were creating the infrastructure which would bring us together. We have all heard “it’s who you know, not what you know.” This rings even truer today with a major focus on people.

What are you doing to grow your social network?

My software team and I at Efficience had a business meeting with an investment firm this week, and it was exciting to be back in that world again and see the latest happenings! They had an interest in a mobile app, which is what we are talking about to many companies these days.

The businesses on the forefront are seeing with their own eyes how the Smartphone is enhancing the opportunity to connect and create real interaction and relationships. This is an exciting space to be in, and I am thrilled to have placed myself on this path.

During our conversation, I listened to one of the principals discuss how well they were doing despite the lack of returns in the marketplace over the past twelve years. This brought me back to why I got out of the investment business back in the early 2000s, which was the thinking that the markets wouldn’t be any higher over the next ten years or so. Along with declining assets and increasing regulatory burdens, the decision was made to get out of that business. Before I did, I had already seen the future, and to me it was going to be in connectivity through software.

Watching the investment business decline and the opportunities fade, I could have felt sorry for myself and lamented that life wasn’t fair, and that since I’d worked so hard somebody had to owe me something. I found it difficult to think that the world I had educated and prepared myself for was slipping away. That is what happens, and will always happen, because things change. And today, it is occurring at an even faster pace.

As an entrepreneur, I wasn’t going to wait on someone or something to come along. I set out to find a new opportunity, and then I went out and made it happen. I went to India to open an office, and now here we are with a wonderful team that builds the latest and greatest applications to connect businesses to their venders, employees, or customers.

More change is coming, and many areas of the economy are not doing so well. For those that are not prepared, it could be painful. What are you doing to stay ahead and ensure that technology and change doesn’t sweep you up into a world in which you don’t want to be?

Mary Meeker recently released her annual overview of internet trends, and I found it to be very insightful. You may remember that I have discussed Mary’s research and opinions on this topic in some of my previous blogs. She pushed forward as a leader in this space with different investment banking firms and is now a partner at one of the most prestigious venture capital firms, Kleiner Perkins.

Meeker’s overview includes more than one-hundred slides, so I have summarized some of what jumped out at me. The general theme is that internet growth is still significant and mobile adoption is still in the early stages. Many of the slides show examples of how this connected world is creating the Re-Imagination of everything.

The Smartphone has penetrated only 953 million users when compared to the 6.1 billion mobile phone subscriptions as shown on slide 11. This is a huge upside. Think about all the new businesses and people considering apps moving forward. Is your business prepared to benefit from this growth?

Next, on slide 10, compare the global penetration between the Android and iPhone shipments. Android has over 250 million compared to over 60 million with the iPhone. This is a four times difference, and it makes you think about for which one you would build an app. Looking at your demographic, area, and global reach will help to determine if you choose to create an app for one or both.

Slide 18 shows India’s usage of the internet on a desktop has decreased over time, and their usage of internet on mobile devices has increased over the period 12/08 to 5/12. Mobile usage has currently surpassed that of desktops, which should be considered for the monetization of sites. Most sites make more money from ads on the desktop than on mobile. This will changes things.

Mary also makes several points about how things are changing in the world with the internet. In 2010, after 305 years, newspaper ad revenue was surpassed by internet (slide 32). The trend lines for the newspaper ad revenue were declining much faster than the internet was sloping up.

From a technology investment perspective, be careful. Look at slide 108. Out of the 1,720 IPOs over the periods 1980 and 2002, only 2% of these companies accounted for 100% of net wealth creation.

Mary states that the “Magnitude of upcoming change will be stunning. We are still in spring training.” She gives a long list of reasons in slide 85. A few key elements include nearly ubiquitous high speed wireless access in developed countries, fearless and connected entrepreneurs, and inexpensive devices and services, including apps.

How are you benefiting from these major trends taking place right before our eyes?

Since the material in Greg Crabtree’s book “Simple Numbers, Straight Talk, Big Profits” has been so enlightening, I want to share more from his book to help us all out in the financial arena. This is not the stuff they teach you in school. It has real world understanding of how to look at your business financials from an entrepreneurial perspective.

As I read the book, I was most recently struck by his comparison between businesses and the NFL. Like the NFL, we as business owners have salary caps. The NFL created a salary cap to max out what each team can spend on their players in an effort to create a fair shot amongst all the teams. Now, you may have not thought that you have a salary cap. I didn’t either. However, in reality, we cannot pay ourselves more than we generate in revenue, and we also shouldn’t pay out more than what would be a respectable profit margin.

Greg points out that every business needs to strive for profit. In general, a company with less than 5% profit margin is on life support. One that is greater than 10% is a good business, and a profit margin above 15% reflects a great business. You need profit to pay your debt and to have cash flow to grow the business.

Let’s look at an example of how this works to determine what your salary cap would look like:

Revenue $ 1,000,000

Salaries $ XXX,XXX

Non-Salary Expenses $ YYY,YYY

Pre-Tax Profit $ 100,000 (10% of revenue, the percentage you want to have to be a good business)

Now you can determine your business’ salary cap. Start by adding up all your non-salary expenses and plug them into Y. Then, subtract your pre-tax profit and the non salary expenses (Y) from your revenue, and the number you have left over is your salary cap (X). This is the number you don’t want to exceed in order to maintain the appropriate profit margin to increase your business. Remember, breaking even is dying, and having less than a 5% profit margin means the business is on life support. If this is not clear, get his book, and it will break it down for you very clearly.

What do you do if your salary number is higher than what it should be to maintain an appropriate profit margin? You go back and look at the productivity of your people and determine who is getting it done and who is not. As we grow, we tend to hire quickly and sometimes hire people into roles that do not meet their strengths. As business owners or CEOs, we need to make sure we have the right people performing in the right roles for optimal productivity.

What is your salary cap, and does it give you the profit margin you desire and one that will grow your business?

I caught up with one of my long-time EO friends, Greg Crabtree, at the EO Nerve Conference in Atlanta. We have hung out and experienced EO events around the world, and we are both passionate about EO and the people there that we learn from and grow with. Greg served on the EO Board as the Finance Chair, which was a perfect fit since his unique perspective allows him to explain numbers in a more entrepreneur-focused way rather than typical accountant speak.

I was excited to catch up with Greg and learn about his first book release! He wrote “Simple Numbers, Straight Talk, Big Profits,” and Nerve thought enough of it to share with all the attendees. Greg told me a little about the book, so I have been eager to read it.

Greg opens the book with a really insightfully point: Most entrepreneurs are not clear on the difference between their salary and the return on what they own. Greg continues, “In fact, all of my clients have confused the profits of their business with their salary.” You get paid a salary for what you do, but you get a return on what you own. When you are not paying yourself a salary at market levels, you are distorting your true net profit margins.

When you are not looking at accurate numbers from this perspective, your financial data is worthless. Making decisions from skewed financial data is, as Greg says, like having a compass that is five degrees off in every direction. If you don’t get real with the numbers, then you won’t get where you want to go.

He gives an example of a client that thought they had at least a 20% net profit margin, but when he looked closer he found they were paying themselves a below market wage. When it was adjusted, they realized that their true profit margin was 5% before taxes. Shockingly, he found most of us entrepreneurs are underpaying ourselves. This may be to show off our higher numbers to others or because we really didn’t know the difference.

Greg subscribes to the Economic Research Institute’s Salary Survey Assessor but says you can go to www.salary.com to compare your salaries with the industry averages. After reading just the first four chapters of the book, I see many opportunities to share more insightful wisdom from Greg in future blogs.

Are your net profits where they should be, or are you over or under paying yourself?

In business we refer to a sandbox as the area in which you play or conduct business. It consists of three things: your geographical boundaries, your products or services, and either your client description if you sell direct or your distribution channel if you sell there.

When determining your sandbox, one area of thought is to make sure that the sandbox you are playing in is capable of getting you to the goals you have created for yourself. Problems could include not having enough customers or not having the right customers in your geographical boundaries. The product or service may have saturated the market you’re in, and the client description could have changed or expanded.

In our situation, we found that to reach our goals we need to add a geographical boundary that is larger and more diverse than our existing one in Knoxville, TN. We have the opportunity to open another office in a market that provides this, and we feel this will open the sandbox for us to get where we want to go.

April Cox, my partner and co-founder of Efficience, will be going to Dubai in the beginning of June to start our new office in that fast growing and dynamic city. April has contacts there from her husband and EO members that we have met over the years, so she will be off and running to network and increase our reach in our new expanded sandbox.

Not only will she be in fast growing market, it is also a modern city adapting to the latest technologies. This will be a plus for us at Efficience because we believe there is a better way to leverage technology and growing in a new environment with other companies that believe this also will be mutually beneficial. It takes four hours by plane to get to our office in India from Dubai, so working with our team there will be more “local” for the companies we connect with as we work together.

We are excited for this expansion and the chance to open the door to new relationships, customers, and product opportunities.

Is your sand box big enough to get you where you want to go?