Startup Q&A #8: Advisory Teams, Business Failures, Evaluating a Niche, Investing in Gold or Bitcoin

Hey everybody, Matthew Paulson here. Today we are going to talk about building a board of advisors, learning from failure, market validation, and investing in gold and bitcoin. Let's do this. This is officially episode 8 of Startup Q and A, the online video show that helps startup founders, small business owners and entrepreneurs grow their businesses faster and achieve their dreams of financial freedom. So whether you're just getting started or you have 100 employees, this is the show that will give you actionable ideas and advice that you can implement in your business. So before we dive into the questions, I want to talk a little bit about a small format change that we're going to do in the show. So previously we would do kind of an intro, we would do the growth hack of the week, five questions and then a resource of the week. And there's probably a good format to start out with, but the shows have been coming in just a little bit long. I really want this to be about a 20 minute show every week and we've been getting 30 minute shows. So I really want to tighten it up a little bit, get down to that 20 minutes. So I'm going to combine the kind of the growth hack of the week and the resource of the week into one section at the beginning of the show that I call the tip of the week. So this week's tip is to use SimilarWeb.com to investigate your competitors websites. So SimilarWeb is effectively Google Analytics for your competitors websites. So you don't need to have any code on your website or anything like that. You can type in any domain on SimilarWeb.com and you will get a ton of valuable information about your competitors. So go to SimilarWeb.com, type in the name of your competitors and just see what comes up. So for me, MarketBeat is my brand. So if I was a competitor to MarketBeat, I might go to tip ranks, type in MarketBeat and I would be able to find a lot of valuable information. For example, you can see what types of other websites are referring traffic to your competitors website. So you can say, oh, on MarketBeat you're getting traffic from Stocktwits, you're getting traffic from MarketWatch thestreet.com and if a competitor of mine saw that, they could say okay, how are they getting traffic from these websites? And is that also a strategy that I can use in my business? Another section of the kind of the dashboard of information that SimilarWeb presents to you is the display advertising section. So if one of your competitors has some kind of ad campaign going, they're spending money on Google Adwords or Facebook ads or Twitter ads. Similar Web can detect this using their massive database of proprietary information. And then they can say, okay, Matt is running Google AdWords, we think he's spending about this. And if you see a giant competitor or a bunch of competitors all using that same kind of advertising strategy, then you know that might be something that you want to do in your business as well. Similar Web will also tell you what social media platforms your competitors are using and getting the most traffic from. So you might know that they are on five different social networks. But Similar Web will tell you what two or three of them are actually sending the most people to their website. So SimilarWeb is a very valuable tool. They have a subscription offering that is frankly expensive at $200 a month. But even if you just go to that website and you type in a domain, the information that they show you for free is very valuable. So definitely use SimilarWeb.com to check out your competitors, see what they're up to, see where they're getting traffic from, and see what you can glean and learn that you can implement in your business. So that is the tip of the week. Let's dive into the questions. So every week we take four or five questions from listeners and viewers of the show through Facebook and through our website. So if you want to have your question answered on a future episode of Startup Q and A, go to the domain startupqa Co and that will send you my website, which is just mattpulsen.com you'll see all of the latest episodes for the show. If you want to submit the question, you just go up to the Startup Q and a kind of menu and the navigation and under that there is a link to submit a question and you can fill out the form. Send me a question, I'll be happy to answer it on an upcoming episode. So the first question of the day comes from Lisa Gurun and Lisa asks what is the best way to begin building an advisory board or a board of directors. So first let me say that it's important to have other people that are successful and smart to care about your business. I think as entrepreneurs we tend to get stuck in the weeds on some issues. We get very myopic. We get focused only on what's going on in the day to day operations of our business and sometimes we just miss out on the big picture. So having other advisors looking into our business, giving advice, it's really valuable because you get a perspective that you might otherwise not get. The other main benefit is you get the expertise of people that are your advisors. You might have a lawyer on your board of advisors, and they might give you some legal expertise because they're on your board. Or you might have a marketing person that gives you marketing expertise. By having that board or some advisors, you can really gain access to some just very useful skill sets that you might not have personally. So if you do want to build a board, there are kind of a lot of different steps involved. But the first is to kind of think, you know, what types of people do I want on my board? Do I need that lawyer? Do I need an accountant? Do I need a marketing person? Do I need an operations person? Do I need an HR person? You know, who are those types of people that I want in my board? And then kind of identify some people that might be able to fill those slots. And the way that you ask any individual to be on your board is very important. If you are successful and you make some money or you're just good at what you do, or your name's out there a lot, you will get asked to be on boards. Pretty often I get asked to be on a nonprofit or business board at least once a quarter. And most of the time, the people that ask me just don't do a very good job. Usually it's an organization that I've never given money to before or I've never shown any interest in, and they say, hey, we've got some opening for board members. Are you interested in being a board member? And that's just not a good way to do it because there's no relationship there. They don't know if I care about their cause or their business. And you really have to do more legwork up front. You want to recruit a board member, first you have to get them to care about your. Your mission. So whether your mission as a business or your mission as a nonprofit, the people that are on your board really have to understand your mission and believe in it as much as you do. And the reason for this is you might be able to get somebody to say yes to be on your board, but unless they care about your mission, they're probably not going to be very engaged and not going to give you very much expertise or help. So it is very important that before somebody is a board member, they are already on board with your mission. The way to kind of make somebody care about your mission is one, just meet with them, kind of talk with them, build a relationship with them, and that way they will care about you. And maybe as an ancillary thing to that, they'll start caring about your mission as well. You can also hold public awareness events and try to get people you want to be board members to come to that event. Or that gives them kind of a safe environment to learn about the mission of your business or the mission of your nonprofit. That way they can learn kind of a no pressure, no stress environment. And then later you can approach them saying, hey, what do you think? Is this something that you might want to get a little bit more involved with? So in addition to caring about your mission, they also have to care about you as the person that is going to accomplish that mission. So I might care a lot about an issue of, say, human trafficking, but unless I also care about the specific nonprofit and the people behind that nonprofit that's working to end human trafficking in my community, unless I care about them as much as I care about human trafficking, I'm probably not going to say yes to being on that board or I'm probably not going to be all that engaged. So you really want people that not only care about your mission, but care about you as an individual. And your individual success follows. Finally, you really have to get into the head of why people join advisory boards and boards of advisors, boards of directors. People generally don't do it to put it on their LinkedIn profile or on their resume or say, hey, look at me, I'm on this board. I'm an important person. That's typically not why people will join a board. People will join a board because one they care about about you and admission, and then also that they think they have something to contribute that's not there right now. So at Sioux Falls Seminary, I'm on their board of trustees. It's an organization I care about. I love the people there. There's some great people there, but also I'm on their board because I have some expertise that they can benefit from. So, you know, one of my core skill sets is marketing. And I was aware that Google has a a program for nonprofits where they can get up to $10,000 a month in free AdWords spend. They didn't know about this. I brought it to their attention. They signed up, I created them an AdWords campaign and now they're getting free web traffic from Google paid ads to their organization's website because one of their board members had expertise in marketing that they may not have had themselves. So really, as somebody who is a board member of a couple nonprofits, I'm really looking for ways that I can create an impact in these organizations and not just be on a board to feel important. And I think other people are the same way. People that are successful. We already have plenty of stuff going on. We don't need more stuff to fill our time. But sometimes we recognize that we have skills and can use them for the benefit of the common good and and are willing to serve on a board of a non profit or a business because we think we can positively impact those results. So if you can find somebody that one who cares about you, cares about your mission and then three actually thinks they can contribute in some way, that's a pretty good indication that person will be on your board. And then once they're on your board, be a good board member. I also want to say that you don't necessarily need to have a formal board of advisors or a formal board of directors. You can just have individual advisors that you get advice from for your business. This is how I do it at MarketBeat and go go photo contest and US Golf TV. I don't have boards on any of these things. Given the size of the organizations in terms of people, I just don't feel the huge need to. But there are definitely advisors that I go to for advice about my business. There's a cast of characters of about 10 people that I go to and get advice from in my book business. The person that I get a lot of advice from is a guy named Steve Scott. He is a well known self publisher. He makes 30, 40 grand a month, some months selling books on Amazon and he has forgotten more about self publishing than I've ever learned. So when I have a question about self publishing that I can't find on his website or anywhere else on the Internet, I go to him because he knows what there is to know about self publishing. And I've been able to build a relationship with him over the last couple years. We share tips, we share ideas. I was on his podcast, I met him at a conference. So he and I have enough of a relationship there where we have a good back and forth where we're giving each other ideas, tips and advice. And I've been able to learn a lot from him as an advisor because of that. And it's not, you know, I never went to him and said hey Steve, would you be a business advisor to me? You know, that's. He'd probably say no to that because he's a busy guy, he's got kids like I do. But you know, he's happy to answer a question here and there, chat on Skype, a little bit, stuff like that. More than happy to do that. But you know, I've never tried to establish that formal relationship. I just tried to let it happen organically. And that's worked out really well for me with guys like Steve and a bunch of others like him. So don't think that you necessarily need that formal board. It is okay just to have people that are advisors too. Second, next question comes from Josh Novak. And Josh asks, have you had any failures in the past and what did you learn from them? So, absolutely, I've had a ton of business ideas that I've never gotten off the ground. Business ideas that I've gotten off the ground and then failed. Back to earth business ideas that had just a tiny bit of success but not enough to justify continuing a business. So definitely I've had a lot of failures. I actually wrote a blog post a couple weeks back that outlined 10 different businesses that I tried to do that didn't work out. So I currently have one home run that's MarketBeat, one solid double, that's GoGoPhoto contest, maybe a single, that's your Golf TV Lightning releases was maybe a double or a triple, but it wasn't the right business for me, so I sold it off a couple years ago. So I've had four successes, 10 failures. And yeah, I mean, I think I've definitely learned a lot from these kind of failures. And I kind of look back at that list that I wrote and I want to highlight kind of two things that I've noticed as common themes among these various failures. The first is that a lot of these business ideas, I just didn't know how to market them. For example, I had a WordPress maintenance service called WordPress Mechanic, WP Mechanic. And the idea was that I would fix people's broken WordPress websites or speed them up or just help them do things with WordPress that they couldn't do on their own. I didn't know how to market that business. I sold maybe a thousand bucks a month. It just wasn't enough to keep messing with it. So I shut it down. And then maybe a year later, Dan Norris, author of the Seven Day Startup, comes along and he has pretty much the same idea. Starts a business called WP Curve, and their sales pitch was unlimited small fixes on WordPress for say 50 bucks a month, something like that. He figured out how to market it. He grew it to probably seven figures in annual revenue, just sold the business to GoDaddy.com for who knows how much. So he has Had a lot of success using that same, pretty much the identical business model that I had. He has had success and I failed because I didn't know how to market, but he did so. Same idea. Both entrepreneurs that are good executors, but he had the marketing strategy, I didn't. So that's why he got a probably mid seven figure check from GoDaddy. And I have a business that I shut down quietly and sold the domain for $250. Marketing was the key difference between those two businesses. He had it, I didn't. So he succeeded and I didn't. The other kind of theme among the failures of my past businesses was execution. I just didn't have the ability to execute or the ideas were too big for me to execute individually. I didn't have the skill or something like that that I just couldn't pull it off. A good example of this was a podcast management and playing web service called Podman that I was trying to start. It's very similar to what Stitcher is today. The same kind of idea, whether you've kind of a centralized management tool online where you can say, I want to subscribe to all these podcasts and you kind of get your own personalized radio station that you can then play on the web or on a mobile device, it's a very similar idea. When I had the idea and I wanted to start working on it, I wrote code for maybe a couple weeks and I just figured this isn't working. I don't have the skills I need to execute on this. I'm not smart enough to write this code and build this myself. I can't pull it off. So then I just kind of abandoned the project. So it was a very good idea. Stitcher later proved that it was a great idea. I just didn't have the programming skills at the time to make it. I didn't have the design skills, I didn't know how to do mobile development or anything like that. So it was just not a business that I could pull off. I couldn't execute on it. So Stitcher is. And they've got, you know, probably an nine figure valuation on their business, maybe ten figure now, or who knows what the valuation, it's really high. But since they could execute it, I couldn't. They've got the valuation and I've got that failed business idea. So those are kind of the lessons that I've learned. You know, choose, you know, business ideas that one, you can pull off, you can execute on and then two, choose business ideas that you can Figure out how to market or have some ideas for a marketing strategy that you can used from the beginning. So the next question comes from David Edwards and he says, when looking to start an online business, what steps do you take to validate a market? For example, what has more potential? Saltwater fishing or yoga? So there are kind of four things that I kind of think about when I answer this question. One, what is your domain, knowledge or expertise? What topics, niches, categories, industries you already know something about or you're already passionate about, you have a big kind of step ahead. Leap forward. If you already know something about the industry you're entering, if you're trying to pick it up from zero, it's a much more challenging task to one, understand the market, understand the needs of the market, and then create products and information that the market finds valuable. So if there is a good market that you already know about, definitely do that over a market that you're know, not familiar with. Second, look for competition. Competition is a good thing. You want existing competitors in a market because that only proves that there are already people in your space making money. When there's no competition. That means nobody has been able to successfully make money in this industry niche category before. And that's probably more of a red flag than a green flag because, you know, there are millions of entrepreneurs in the United States, a lot more around the country, and if nobody has had this unique idea you've had before, you're either Thomas Edison or you're a person working on a business idea that's been tried before and failed. So maybe you're Thomas Edison. Let's hope so. But if there's no competition, proceed with caution. I love competition because then that means people are already paying money for this industry. I don't have to educate them on the value of the products and services that I'm going to offer. I just have to create a more compelling value proposition than what's already out there and convince customers to switch to me. Which is much easier than educating them on something that's brand new and convincing them that they need that thing and then they need that thing from me. So I'd love to see competition. Third, find a market where people are willing to buy stuff from you and are able to. So Marketbeat, the audience is 40 to 70 year old men. They own stocks, so they probably have some money. So one, they've got money and then two, they're willing to give me some of that money because they have already shown through other companies that they are willing to buy information Products and services about stocks. Thestreet.com proves this. Agora Financial proves this. Lots of other companies have done this before. I'm not reinventing the wheel. I'm only saying you've already got these other services. MarketBeat is a great compliment to them. Give me 15 bucks a month. You won't regret it, I promise. That's just a very easy sales pitch to that audience because they've got money to spend and two, they're willing to spend it on my industry. Conversely, let's think about a niche like crafting. My wife loves to do card making. We're setting up a desk in a basement for her so she can have kind of a dedicated card making space. Any money that she has is going to probably go to clothes and shoes and stuff like that before it goes to a card making information, product or service. Any money she does have for card making is probably going to go to equipment and supplies, not to a website that teaches people how to do card making. That is just a less lucrative industry because primarily women that are the consumers of this content, their disposable income is limited in some cases. And then whether they're willing to spend that money with you is another question. In card making or crafting, that's probably not going to be a very lucrative niche because they're going to spend all of their money for card making on supplies and not on your information product. So focus on things where people have the money and they're willing to spend it on you. Then finally think about marketing. Do I have some good ideas ahead of time on how to market this business idea? Do I have some strategies that I can try up front? Marketing is probably the most underappreciated and undervalued component of building a business. If you have one idea where you've got a whole bunch of marketing ideas that you can try versus another one where you don't. You always pick the one that you can understand the marketing for over the one that you don't. So those are the four ideas. One, follow your expertise and your passion. Do something that you know about. Two, if there's no competition, take that as a red flag. Three, find a market with an audience willing to pay you money. Fourth, understand the marketing and think, how can I market to this niche? If you answer those four questions, you can meet those four criteria. You probably got a pretty good niche category industry idea. I actually go over this in detail in my brand new book, Online Business from Scratch. If you go to the domain from scratchbook.com, you can go to Amazon and then you can buy a paperback copy for $10, an e book copy for $3, or an audiobook copy for one audible credit. And you can go into detail on how to do that. If you do want the audiobook, buy the Kindle book first and then you can buy the audiobook for $1.50. I have no idea why Audible does that, but if you buy both the kinder book and the ebook, you can get both for like $4.50. So that is a great value if you choose to do that. So inside that book we just go through all the things I talked about now and a few other things and there's kind of a nice tool to compare different niches. So definitely check out online business from scratch@fromscratchbook.com alright, the final question comes from Ryan Daniel Moran and Ryan asks, should entrepreneurs invest in gold and bitcoin? He asked this as a little bit of a tongue in cheek question because I railed against gold and bitcoin. On his investor panel at his conference called Freedom Fast Lane Live. Another one of the speakers was talking about how he invest in income generating investments and then like a minute later said, hey, I buy gold and bitcoin. It's like these two things don't make sense because you know, gold and bitcoin don't create income. So I called him out on that and that was kind of part of the conversation for the rest of the conference. So, you know, I don't recommend that anybody buy gold or bitcoin. And there's kind of reasons for each of these. You know, people that invest in gold, they say that, you know, it's going to be a great hedge in case the currency collapses, if there's a Great Depression or if a zombie apocalypse happens or some world changing event where the global economy is a giant mess and you can't get food from a grocery store anymore or they think gold will be valuable in place of a currency like the dollar. But really if stuff hits the fan down the line, you would much rather have a supply of food and water and guns and medicine in your house than you would shiny yellow metal that has no kind of utility in your in a very scarce environment where resources are limited and hard to come by. So if you're really concerned about the end of the world, get a month's supply of food that has a long shelf life. Get some bottled water. Get a couple guns. I have a couple guns just in case. I'd rather have those than some shiny yellow Metal in my house, stuff like that. Get some basic emergency supplies so that you could go say a month without having to support system from that you rely on. So grocery stores closed for a month. What do you do? Have an answer to that question. And you are much better prepared for a giant downturn in the economy than you or a world ending event than you are by having a bunch of gold. So don't buy gold as a hedge. Buy emergency supplies instead. Don't go crazy, don't be a prepper and make it your lifestyle to be somebody preparing for something that may never happen. Live your life today, but do just a little bit of basic preparedness over buying gold as a hedge in that situation. And then bitcoin, that's kind of another issue. Same types, similar but not identical. Bitcoin is a very volatile thing. Now it's over $1,000 because Chinese investors and Venezuelan investors have lost confidence in their currency. So the bolivar, the Chinese yuan, I think it's the yuan. They are concerned that the valuation of their currency is going to tank pretty soon. They already are kind of tanking. So Chinese investors and Venezuelans are trying to put their money into other assets outside of their country. This is why, like Seattle and Canadian real estate prices are shooting up, because Chinese investors are putting a ton of money into those things. The same is true for bitcoin. They're buying a bunch of bitcoin because they think that the bitcoin will store their value better than their own currency will. So as those currencies kind of take a little bit of a dip, the price of bitcoin has shot up. But that doesn't mean that it's a good investment, especially not today. Yes, there are plenty of people that made lots of money buying bitcoin five years ago and holding it till today. Those people look like geniuses, but only in the sense that they bought a winning lottery ticket. Nobody could have known bitcoin is going to be what it is today then. And we just really have no idea what the prices of bitcoin is going to do over the next couple years. Maybe it'll go up, maybe it won't. But it's not predictable. And the market forces behind this are just really hard to understand and probably, you know, not. Probably not possible to understand in a way that, you know, makes sense to. So I just don't think it's a good investment because it's too volatile, it's not predictable. You can't make a smart bet in bitcoin saying I have inside information knowing that it's going to go to $1,200 or $1,300 in the next year. Just nobody can know that. So it's just not a good investment, in my opinion. Okay, so those are the questions for this week. So if you would like to subscribe to Startup Q and A and get next Monday's show delivered to you automatically, go to the domain startupq and a co and then there are links to subscribe via email, Facebook, RSS, iTunes, YouTube and Stitcher. So you can really consume this show in just about any way that you want. You can also follow me personally on facebook@facebook.com matthewpolfsonpage or if you want to add me as a friend on Facebook, just go to facebook.com MatthewPolfsen you can do that too. If you want to follow me on Twitter, my user ID is MatthewDP. So Matthew and then D as in Doc, P as in pony. Follow me that way. Then if you enjoy the show, please go to itunes and leave a review. That will be very helpful and just letting other people know about the show so. So that they can benefit from this advice and grow their businesses faster and also achieve their dreams of financial freedom. So that's it for this show. Thanks, everybody. I'll see you next week.