Why Your 'Great Idea' Actually Sucks

Why Your 'Great Idea' Actually Sucks

access_time Jul/20/2017

Everyone wants to come up with the next Uber, Facebook or Tesla. But, if Entrepreneur Network partner Patrick Bet-David has to choose between someone with a great idea and someone with great sales skills, he's taking the salesperson every time. Why? 

Well, look at the history of great businesses. Ray Kroc didn't start McDonald's, but he learned how to sell the fast food restaurant and made far more in his life than the actual McDonalds brothers. Steve Jobs couldn't code like Steve Wozniack, but he knew how to sell Apple, and his estate is worth far more now than Wozniack's.

Facebook, Tesla and more. Each time, it seems like the great salesperson ends up earning more than the person who created the great idea to start with. 

Watch the video to learn more about the relationship between great ideas and great sales techniques.

Related: 8 Important Business Skills You Can't Learn in School

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Somebody Needs to Tell Jeff Sessions That Legalized Marijuana Does Not Cause More Crime

Since early 2017, one of the issues revolving around legalized marijuana was generated by Attorney General Jeff Sessions.

An adamant opponent of legal marijuana, Sessions said in February that legalizing marijuana ends up creating violent crime. He said had this information from experts. To this point, he has not furnished that data, but it has raised the question:

Does legalized marijuana lead to higher crime?

So far, studies show that is not the case. A recent study in California actually showed just the opposite.

Related: Women Cannabis Entrepreneurs Gather In L.A. for Empowerment Summit

No Dispensary, Higher Crime

The study by researchers from the University of Southern California and published in the Journal of Urban Economics, compared crime data in Los Angeles neighborhoods where dispensaries were closed by the city with areas where dispensaries remained open. The researchers wrote, “Contrary to popular wisdom, we find an immediate increase in crime around dispensaries ordered to close relative to those allowed to remain open."

They found that many of the crimes committed were the sort that the presence of bystanders would have stopped, such as property crimes and auto theft. They found a similar pattern in areas where restaurants were forced to close because of health violations.

Related: Oakland Strives to Rejuvenate Economically by Becoming California's Cannabis Capital

Sacramento Study

A similar study published in the Journal of Study in Alcohol and Drugs found that the presence of medical marijuana dispensaries had no discernable effect on the crime rate.

Researchers from the University of California, Los Angeles, examined the association of marijuana dispensaries and crime in 95 Sacramento census tracts. They found that violent crime and property crime varied depending on the number of commercially zoned areas, one-person households and the local unemployment rate but medical marijuana dispensaries were not a factor.

The report states that dispensaries may actually help reduce crime because many use video surveillance or hire doormen, two factors that contribute to fewer crimes in the nearby area.

Related: Getting Healthy, Not High: Using Cannabis to Fight Cancer

Denver crime increase.

It’s possible Sessions was referring to the crime increase in Denver. The number of crimes has risen 44 percent since adult-use marijuana became legal in 2012. However, local law enforcement does not believe marijuana is the issue. Denver police spokesman Sonny Jackson told the Denver Post that “crime is up,” but added,”I don’t know if you can relate it to marijuana.”

Denver has tracked marijuana-related crime since 2012, and found that such crimes constitute less than 1 percent of all crimes in the city, the Post reported. The city report found 183 crimes related to the legalized medical and adult-use marijuana industries in 2015.

Follow dispensaries.com on Instagram to stay up to date on the latest cannabis news.

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How to Raise Your First Round of Funding

It’s tough running a startup on little capital. One of the biggest reasons why companies fail is that they run out of money. As an entrepreneur, raising capital is a skill that you must have. If you are unable to successfully raise capital, your company will have little to no chance succeeding to the heights that you want it to go. I chatted with Kobie Fuller from Upfront Ventures and David Siemer from Wavemaker VC to find out their top advice for raising money

1. Do research on who you’re talking to.

When I asked Fuller and Siemer what most entrepreneurs get wrong, both of them told me the exact same thing -- a lot of entrepreneurs do not do research on the firm or investors that they are meeting with. This is an indicator to investors that lets them know how prepared an entrepreneur is. If you don’t know your investors’ history or specialties, it’s a red flag. You probably won’t get funded if you pitch your photo sharing app to a firm that specializes in making enterprise software investments. Make sure you do heavy research on the investors that you are meeting, as well as the firm that they are a part of. If you go into meetings well prepared, you will leave a much better impression on the investors. 

Related: The One Question You Must Be Prepared to Answer When Pitching Investors

2. Get warm intros, and if you don’t know how to get one, figure out a way.

Most venture capital firms won’t even take a meeting with you unless you have a warm introduction, but how do you get one if you don’t know anybody? According to Siemer, there’s a shortcut if you have some capital -- pay up and get a lawyer. Most lawyers know all the venture capital firms in town, so they could immediately introduce you. Other ways can include contacting angels, who can then refer you to a firm, and if you still have no luck, it’s up to you as an entrepreneur to figure out a way and get it done. If you can’t even figure out how to get a warm intro, you are probably not fit to be an entrepreneur. 

Related: For Entrepreneurs, Venture Capital Is Not Always the Best Option

3. Don’t “pitch” -- be human and connect.

Too many entrepreneurs get caught in the trap of trying to “pitch” too hard and shove their companies down investors’ throats. At the end of the day, investors are human, and they have to sit through long meetings with many different entrepreneurs that just view them as dollar signs. It’s important that you understand this so that you can be a breath of fresh air to them. Usually it takes many meetings to get to know investors well enough to partner with them. Fuller says, “It’s like dating, you don’t want to go on your first date then ask them to get married.” Be patient and foster long-term relationships with people. It will pay off. 

Related: 5 Ways to Take Advantage of Corporate Venture Capital

4. Articulate your vision and have a competitive edge.

Even if you have the greatest product in the world and the most talented team, nobody will know unless you articulate it. It is your responsibility as the founder to effectively communicate why your team will succeed in its field. Work on your ability to articulate your vision so that others can buy into it.

Fuller and Siemer both also suggest that the most attractive companies to invest in have some sort of competitive advantage in their industry, whether it be having a proprietary technology, having more connections and better relationships with supply chains, or simply being the first to market. If you don’t have some sort of competitive advantage, your business is probably easily replicable and susceptible to threats. Develop an edge and hone it. 

Related: To Raise or Not to Raise, That Is the Question

5. Tell a compelling story.

One of the most important points of being able to raise funding is to build a narrative around why you are creating the product. The investors have to understand on a deep level why you are building what you are building, and what motivates and drives you. If you think about great companies such as Airbnb, Facebook or Twitter, there is always a compelling story behind the product. Without a story, it is difficult for investors to really understand and connect with you on a deeper level. You want the investors to be cheering for you so much that they want to join you and be part of the story. 

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Have You Fallen Victim to the Small Business Credit Conundrum?

For most small business owners, there is an unspoken rule to always separate church from state when it comes to using personal credit for business.

Related: The 4 Lines of Credit Now Available to Small Businesses

The obvious reason is that personal credit should be used only for non-business expenses while business credit should be used solely for the benefit of the business and “never the twain shall meet.” 

However, in the current lending environment for small-to-medium-sized businesses (SMBs), this goal of a clean credit demarcation is less clear than most people realize.    

Credit confusion

Every day, tens of thousands of SMB owners apply for and, liberally use, their business credit for a wide variety of needs. Yet, as outlined in a 2017 survey conducted by the National Small Business Association, “46 percent of all small businesses use personal credit cards. Many small businesses fail to separate business and personal expenses . . . according to research conducted by MasterCard." 

In addition, the Nav American Dream Gap Report, conducted in 2015, revealed that, of the small business owners surveyed, “45 percent did not know they had a business credit score, 72 percent did not know where to find information on their business credit score, and 82 percent didn’t know how to interpret their score.”   

To some degree, the meaning of "credit" that we've grown accustomed to has perpetuated misconceptions relating to the process of accessing either type. Many SMB owners incorrectly assume that their business and personal credit are completely unrelated. Different cards, different accounts, different terms, right?

Related: 4 Steps to Establishing a Good Business Credit Score

Much to the chagrin of many, however, this is not the case.

As the usage lines continue to blur among credit types, many SMB applicants continue to be understandably confused by approval requirements specific to small business credit. Meanwhile, on the other end of the spectrum, commercial lenders are instituting stricter demands for credit approval. And these, unfortunately, translate into less access to business credit for many SMB owners.

So, no matter which way you look at it, the reality is that business credit is for the most part inextricably linked to your personal credit -- you must have one to unlock access to the other. Accordingly, the idea of complete separation turns out to be nothing more than a clever marketing illusion.

Personal credit infractions impact business.

To begin with, in our current SMB lending environment, most applicant approvals are directly tied to an applicant’s personal credit score. In the event that his or her personal credit score is low, the alternative route to credit access is a personal guarantee by someone else. 

Further, after an applicant receives credit approval, should this person pay late or default on payment terms, then his or her personal credit suffers a negative impact immediately.

Simply put, SMB owners seeking business credit are boxed into a system that is heavily dependent on personal credit.  Unfortunately for many of these owners, personal credit infractions of the past can disrupt opportunities (dependent on credit access) in the present that could have helped grow the business.  

Data-driven access

So ,what is a viable alternative funding solution that SMB applicants can pursue that doesn’t require access to a personal credit score? One such solution, developed by Fundbox, combines artificial intelligence and something called the Small Business Graph, which provides SMB applicants a new, more convenient path to credit.   

Think of the graph as an intricate network of transactional data that emanates from and around the SMB applicant’s business. This transactional data can include processed invoices (issued or paid), purchases of goods and services, payments to preexisting lines of credit and more.

In volume, this data, accessed via bank accounts, ERP, CRM or accounting software, forms informational “signals” that an artificial intelligent (AI) risk model uses to quickly assess the credit-worthiness of the SMB business in question.

With the growing amount of SMB data that's constantly being generated naturally through the regular course of business, this solution offers an alternative to personal credit validation faster and more efficiently any human underwriter would be able to facilitate.

Image Credit: Fundbox

Purposely built for growth

As cloud computing continues to expand, and more small businesses are connected using internet-based applications, the resulting bounty of digitized data is feeding into the Small Business Graph and quickly democratizing access to credit for all SMBs.

This includes applicants who would prefer not to use their personal credit for a credit application process and those who have been denied access based upon their personal score.   

In closing, there’s no doubt that small businesses are the foundation to our economy. Therefore, it’s to everybody's best interest that SMB owners have access to the right tools and services designed to help them thrive.  

Related: 8 Ways to Get the Most From a Business Credit Card

With the right data backing up today's underwriting and funding process, small businesses can reach their potential, unhindered by the traditional small business conundrum of credit.   

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9 Crucial Tips to Protect Your Small Business From Credit Card Fraud

Processing credit cards for your small business is pretty much a given these days. Unfortunately, cyber-criminals are well aware of the increase usage of credit card payments. Nielsen expects that by 2020, credit card fraud will result in over $31 billion in losses.

In short, credit card fraud is a very real threat to both your bank account and reputation. Thankfully, you can avoid credit card fraud from damaging your small business by following these nine tips.

Related: 25 Payment Tools for Small Businesses, Freelancers and Startups

1. Use an Address Verification System.

An Address Verification System (AVS) is a tool used by banks and credit card associations. The AVS are able to compare the numerical part of a customer's address to the information on file. The issuing bank can then verify when a merchant makes an authorization request.

For example, if the cardholder's name and address is Mr. John Smith, 123 Main Street, Realtown, USA 09876, the system will verify 123 and 09876. Once this info is sent, the merchant will receive one of six codes: full match, partial match address, partial match zip code, no match, international, and unavailable. Receiving a full match for AVS assures you that there is less risk processing this payment.

However, don’t solely rely on AVS. There could be instances, like when a customer moved and hasn’t updated their address yet. Also, AVS is only available from banks and not payment software or gateways.

Related: Online Debit, Credit Fraud Will Soon Get Much Worse. Here's Why.

2. Upgrade to chip readers.

Counterfeit cards are one of the most common types of fraud in brick-and-mortar stores in the U.S. There’s a good explanation: we’re behind on implementing EMV.

If you haven’t already, it’s past time to upgrade to chip readers. An EMV is more theft-resistant than swiping the magnetic stripes of credit cards. Additionally, merchants who are using chip readers aren’t liable if credit card fraud does occur.

Related: 38 Crucial Tips to Prevent Card Fraud (Infographic)

3. Keep an eye out for unusual customer behavior.

If you accept credit cards in-person pay particular attention to the cardholder for warning signs including:

  • Pulling their credit card out from their pocket, instead of a wallet or purse.
  • Purchasing a large number of expensive items.
  • Purchasing an unusual variety of items, such as clothing in multiple sizes.
  • Rushing to complete a checkout at a closing time.
  • Telling you not to insert or swipe their card because it doesn’t work.
  • Handing you their phone when they claim that they’re talking to their bank.

A customer who does any of these actions isn't automatically guilty of credit card fraud but these are some some of the tricks fraudsters use. Trust your gut when a customer seems suspicious.

Related: Mobile Fraud a Blind Spot for Ecommerce Merchants

4. Process online payments safely and securely.

What if you process payments online or over-the-phone when you don't handle the credit card? You can process online payments safely and securely.

Reviewing the following before processing a payment:

  • Orders that have several of the same items - especially when it wouldn’t make sense to purchase multiples. I mean how many iPhone 7 chargers does a customer really need?
  • Orders consisting of “big-ticket” items, such as TVs.
  • Multiple same day purchases.
  • Multiple purchases coming from the same IP address.
  • “Rush” or “overnight” orders.
  • Orders that have failed AVS (Address Verification Service) or CID (the three-digit value on the back of the card).
  • International orders from countries that you usually don’t have customers in.
  • Orders that are shipped to a single address, but made on multiple cards or using multiple billing addresses.

Since 45 percent of all credit card fraud involves card-not-present transactions, make this a priority for your small business.

Related: Online Criminals Are Tricking Entrepreneurs Into Doing Their Dirty Work

5. Secure network access.

Secure your network by utilizing encryption, limiting employee access to sensitive data, using updating the latest versions of any software that your business is running, and using separate devices for your personal and business use since this can decrease the threat of cyberattacks like phishing.

Also, please remember to use anti-malware software.

“Cybercriminal use all types of malware, including Trojans, Man-in-the-Middle, Man-in-the-Brose, and keyloggers, to get what they want, including personal data and payment details,” says Due co-founder Chalmers Brown. “Continue updating your tools to detect malware that may be present. You may also need to invest your time in understanding how malware is used in terms of patterns used by cybercriminals. Focus on using malware detection solutions that can work in the background rather than relying on those options that involve user downloads or registrations.”

Embrace layered security measures like generating strong, complex passwords that contain numbers, upper and lower case letters, and special characters, as well as two-factor authentication.

Related: Passwords Are Slowly Becoming a Thing of the Past

6. Use tokenization.

In layman’s terms, tokenization replaces numbers with a token. This is a mathematical representation of a number.

If you accept payments through Apple Pay or Samsung Pay you’re already using tokenization. These services aren’t actually transmitting the customer’s real credit card number.

Related: Your Security Concerns About Using Mobile Payment Are Valid

7. Report fraud immediately.

No matter how prepared you are and the security measures that you’ve taken, you can’t completely prevent credit card fraud. If you suspect that an instance of fraud has happened, then you need to act immediately. Quickly call the card issuer’s authorization center. You say that you have a “code 10 authorization request.” Hold onto the card itself, if possible.

If the card is not present, and you suspect fraud, don’t hesitate to call your credit card processor, bank, and even the local authorities.

Related: 8 Security Tips for Small Businesses Accepting Online Payments in 2017

8. Follow PCI Security Standards.

These are security standards established by the Payment Card Industry. The standards have been designed to guide small businesses. They instruct how to securely accept, transmit, and store cardholder data. Becoming compliant is one of the most effective ways to thwart credit card fraud.

Becoming PCI compliant is your responsibility. Thankfully, you can read all about these PCI Security Standards online. Reviewed this resource and implement the recommended security measures and frequently test your framework.

Related: The 15 Most Popular Online Payment Solutions

9. Continue educating yourself on credit card (and other types of) fraud.

Always remember that credit card fraud is constantly evolving. Cybercriminals are diabolical and will use the latest technology to commit acts of credit card fraud. In other words, the advice listed above may not be relevant in the future.

Make sure that you frequently stay updated and informed on the latest credit card fraud tactics. Stay current with the best ways to protect both your business and customers.

Additionally, don’t neglect other types of fraud that target small businesses. These include:

  • Invoice fraud where you’re tricked into paying a fake invoice for advertising, domain name renewal, office supplies, or directory listings.
  • Overpayment scams where a “customer” overpays for an item, and then asks for a “refund.”
  • Malware where you accidentally install software on your device that gives scammers access files or track your activities.
  • Ransomware is malicious software that will block access until you make a payment.
  • Whaling or spear phishing are when criminals attempt to obtain confidential information.
  • Scammers posing as a boss, client, or another authority figure and then demand an employee transfer money to a bank account.
  • Some disgruntled or nefarious employees will use business credit cards for their own personal use or purposely leak sensitive information.
  • Government imposters where criminals pretend be from a government agency, like the IRS, demanding an immediate payment.

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How Big Data's Use in Commercial Lending Can Level the Playing Field for Entrepreneurs

In the U.S., there are nearly 28.8 million small businesses, including franchises, which account for 48 percent of the private workforce, as reported by the U.S. Small Business Association. While they serve as a backbone to the U.S. economy, small businesses have been at a disadvantage when it comes to receiving commercial lending from banks due to a lack of modernizing of the lending infrastructure. To benefit both the borrower and the lender, we must improve transparency and the loan process to protect and ascertain the true value of small businesses.

In 1970, the Fair Credit Reporting Act (FCRA) ushered in a new digital infrastructure made up of data, scores and rights of consumers to ensure the successful growth of the consumer finance industry and the consumer driven economy. Credit card companies proliferated, and the "Big Five" credit and rating agencies were established.

Related: Online Small-Business Lending Is Set to Bounce Back

Like many established markets, regulation helped to create a market where a superhighway of financial products could flourish. This provided consumers a new lingua franca -- the credit, or FICO, score, which dictates whether individuals are able to get a mortgage, auto loan or credit card. FICO typically gives the best rating to those individuals who consistently pay on time, have limited credit card debt and no negative collections activity, judgments or previous bankruptcy filing. However, the unintended consequence of the credit score was that it eventually became the standard by which individuals, and specifically their businesses, are judged by financial institutions for being eligible for investment and capital.

When researching for our book, What's Your Business Worth?, Daniel Priestley, Scott Gabehart and I discovered that nearly 67 percent of all businesses are under-financed. Following the 2008 financial crisis, banks, and especially smaller community banks who were more likely to lend to smaller firms, were hit hard, leading them to become more risk adverse. Regulatory overhauling responded to the crisis by forcing banks to convert capital and make fewer risky loans. In its report on small business lending, Harvard Business School revealed that this forced the fewer than 6,000 community banks throughout the U.S. to place a greater focus on the borrower’s own profile, including personal income, higher personal credit thresholds, including higher credit scores, and higher collateral requirements.

Related: 5 Tips to Improve Your Odds of Getting a Small Business Loan

Typically, when initiating the commercial lending process with a financial institution, business owners and entrepreneurs are asked two questions -- What is your credit score and what is your current income? -- the same questions that individuals are asked when they are seeking a personal loan, highlighting a benchmarking process that works to disadvantage small business owners.  

These two questions hold the key for the bank to begin looking at financing options for small businesses yet are not truly indicative of how their business is progressing or what the business owner has built. These older scoring methodologies must be updated beyond the variables that are included in a FICO score for commercial lenders to make improved lending decisions.

Related: Busting 5 Myths About Small-Business Lending

Luckily, advances in big data technology have begun to force commercial lenders into holistic adaptation -- incorporating new data insights to new small business owner demands in efforts to make lending faster and more efficient. Big data provides transparency to both borrowers and lenders, giving borrowers more information on the terms other businesses are receiving, while lenders are able to mitigate risk by having a thorough understanding of the businesses’ valuation, revenue, capital and collateral. Overall, it will be beneficial for both parties if loans are better able to reflect not just the primary shareholders' credit worthiness but the businesses' value and worth.

If the economy and the banking sector can find a way to better marry the supply of available funds to the demand for lending from the business owners this would usher in a full-scale revolution in commercial lending. At BizEquity, we believe that in order for this to occur there needs to be a new, fair and open lending act and data infrastructure established for the small and midsize business, one that rewards the business for its value. For in the end, modeling credit based solely on risk and not the potential capacity for growth will forever short wire the business and the commercial lending industry.

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