Lesson #56: Frequent Legal Questions of Startups

Getting good legal advice, from the very beginning of your startup, can save a lot of unnecessary hassles down the road.  For this lesson, I solicited the input of a great lawyer here in Chicago, Bart Loethen at Synergy Law Group, whose practice specializes in assisting early stage startups.  Below are some frequent questions early stage companies ask of their lawyers, and Bart's high level recommendations for each.

What business structure should I form (e.g., C-corp, S-corp, LLC)?  When building an enterprise, it is usually suggested to form it as an LLC.  An LLC brings all the legal protections of a corporation (e.g,. protects your personal assets if the company is ever sued), but avoids double taxation of the income from the business with flowthrough of the profits of the LLC directly to the shareholders.  That said, if you anticipate raising outside capital from venture capitalists, many of them will require you to form as a C-corporation for them to comply with Section 1202 of the tax code (which is set to expire in 2011, so this matter may become moot).  If a C-corporation is required by your investors, it is easy enough to transition from an LLC down the road.  If a financing is not imminent, the tax savings you will realize from the LLC is typically greater than the legal costs of switching to a C-corporation down the road.  So, more often than not, it is best to start with an LLC. 

The time to use an S-corporation is when you are launching a personal services business (e.g., law firm, ad agency, consulting firm), where you would not have multiple types of partners with different interests and where you do not intend to sell the company because the value is merely that delivered by the founder.  Also, S-corporations allow modest self employment tax savings compared to LLCs.

In what state should I form the company?  The answer to this question is largely around protecting the board of directors from any lawsuits from disgruntled investors down the road.  So, typically, venture backed businesses, or other businesses where the majority of the company is not controlled by a tight group of founders, will form their business in Delaware or Nevada, two states that provide a higher level of protection for the board of directors than in other states.  These protections will help you attract venture capital investors and high-quality outside directors for your board.  If these are not issues to you, there is no reason you cannot form your business in your home state, unless there are tax benefits of forming elsewhere.

How do I protect my intellectual capital? Do I need a patent?  Keep in mind, companies have intellectual rights whether they have a patent or not.  All a patent does is ensures no one else can come up with the same idea and claim it on their own.  The answer to whether or not it is worth the $10K average cost it takes to file a patent application varies on a company-by-company basis.  If you are a life sciences or hardcore technology business where your solution is critical to your business survival, then by all means, it makes sense to file a patent right from the start.  If you are a SaaS or services business, where protecting your process is less important to your survival, you can wait to file a patent until you have more cash flows from revenue, or after you have acheived proof of concept, when you can better afford such fees.  That said, patents are definitely selling points to talk about with investors or other partners.  So, keep that in mind, if you think it will help you close an investment. 

But, even if you have a patent as a startup, they can be very expensive to defend, often adding up to hundreds of thousands of dollars in legal fees, which most startups typically don't have lying around.  So, where you can, look for a patent lawyer who is willing to work on a contingency basis, taking their fees from any resulting awards to the company from their efforts on the back end.

How important are getting Non-Disclosure Agreements signed?  As with patents, you still have intellectual rights if you don't have an NDA in place.  So don't be too worried about sharing your idea with prospective investors.  As a rule, venture capitalists do not want to sign NDA's, and are often insulted by founders that ask them to sign an NDA, as that is not how they work.  So, proceed with VC's without an NDA, understanding there is nothing that stops them from investing in a similar business.  So, don't give away all the company secrets until you are far down the road with them.

But, for strategic partners, it is perfectly acceptable to ask for them to sign an NDA, most typically on their standard form, which your lawyer should review.  Theoretically, a strategic partner prospect is already in a similar business to start, otherwise you wouldn't be reaching out to them.  And, the benefit of an NDA is that it specially lays out your rights with governing rules of what needs to be done with the disclosed information.  More importantly, it proves they had access to the information at a certain point in time, which helps in your defense of your intellectual rights down the road, if necessary.

How should I structure my equity in the business, both for founders and outside investors?  There are too many variables based on your specific situation to specifically answer this question.  So, I will lay out a few things you need to be sensitive to around this topic. 

First of all, it is important that any work done on your business prior to formation, is legally documented as owned by the company at the time of formation.  So, collect key signatures from all founders, employees, contractors, etc. with them agreeing that all work done for the comapny was done on a "work for hire" basis and they assign all inventions to the company.  And, this document needs to be in place for any and all employees and contractors going forward, so no one can ever claim rights to the company's intellectual capital down the road.  This is relevant to equity discussions, so no previous founders or employees that are no longer working with the business, come back looking for equity value down the road after you hit it big.

If there are any co-founders in the business, their shares need to be put on a vesting schedule, earning full rights to such shares over time, in case they quit or die during the early months or years of building the business.  That way there is no confusion on what to do in those scenarios.  And, this document should clearly lay out any transfer restrictions on their equity, how the holder can liquidate their equity, and at what valuation metric, etc.  And, it should consider whether there needs to be multiple classes of stock, based on one founder investing cash or not, needing to get their invested capital returned before anyone else, or any other voting rights that need to be decided, for change in control or corporate issues.

If you are taking in outside venture capital, that opens up a whole new layer of complexity to your capital structure.  An investor will most likely be asking for preferred shares (at the top of the payout pile), with a certain level of liquidity preference (1x-3x return before common shares see any payouts).  And, they will be putting in lots of voting/board controls for themselves, and adding other restrictions on transfering or selling equity, or otherwise.  And, they will be putting in mechanisms, called rachets, that protect them from anti-dilution based on decreases in the company's valuation from "down rounds" down the road.  Way too complicated and way too many options to consider to get into any more detail for this high-level lesson.

So, as you can see, a good lawyer can help you think through all of these issues upfront, before running into any unexpected snags or ugly situations down the road.   So, if you need any futher help from here, and you most certainly will, Bart Loethen at Synergy Law Group has deep experience with startups and his hourly rates are a lot more affordable than those charged by the bigger firms.

For future posts, please follow me at:  www.twitter.com/georgedeeb

Lesson #55: Creating a Healthy Office Environment

Back in Lesson #13, we talked about Creating The Right Culture For Your Startup.  In that lesson we talked about different management styles, communications styles and maintaining the proper work-life balance for your employees, to help build morale amongst your team.  Directly related to building morale is your office environment itself.  Nothing can dampen morale faster, than working in an uninviting or dysfunctional workplace.

We have all been inside exciting workplaces, where everybody is feeding off the energy of everyone else in the office.  You get this vibe inside offices like Google, YouTube and Groupon.  These are typically more open floor plans, without high cubicles, without a lot of private offices, where you can see and hear all of the action and buzz of the staff engaging amongst themselves.  These are places where employees are pumped up to come to work each day.  So, it is not coincidental really great startup companies, also have really inviting work spaces, which help them to attract and retain great employees.

We have also all been inside workplaces that are better defined as a "morgue".  These office spaces are typically not well-lit (or lacking windows), where employees are buried in their private offices or behind high cubicles and you can often hear a pin drop in the office.  No employee conversations, no music, no energy at all.  This kind of office space is a recipe for disaster for a startup, as employees will only deal with that type of environment for so long, before they will go stir crazy.  Especially "A-type" personalities that want to get involved with exciting startups.

Now, I am not saying startups need to go spend a ton of money on fancy desks and office build-outs, as that would be foolish.  What I am saying is: (i) locate your office in fun neighborhoods, with good local conveniences that are easy to commute to; (ii) prioritize "edgy" loft buildings with high ceilings over cookie-cutter high rise office spaces; (iii) set up workstations (or folding tables) without high cubicles which shut off employees from each other (impeding upon open collaboration and communication); (iv) make sure there is a good vibe in the office, with background music or otherwise; and (v) set up a room with a TV, video game player or ping pong table where employees can blow off steam, when putting in the long hours (provided these luxuries do not get in the way of their doing their jobs).

If you can find pre-furnished, pre-wired or previously built-out space, that is the best alternative to keeping your furniture, build-out and rental costs at a minimum.  And, if you need furniture or equipment, look for vendors of used furniture to save you a lot of money compared to full retail prices for new furniture or equipment.  And, I wasn't joking about considering folding tables.  iExplore bought all of its first desks at $19 per folding table to stretch our startup budget.

I was in the office the other day of a company trying to reposition itself as a high-flying dot com startup in a major turnaround story.  And, my immediate reaction was, "not until you break down these walls and infuse more energy into this space".  Morale was bad enough, with the company trying to recover lost sales and get the business back to profitability.  Yet alone, layer on the additional negative vibe of employees feeling like they were coming to the "morgue" each day.

Little things like this can really matter to employees, especially with lots of other startups out there for them to choose from.  And, sometimes, your office environment can be the difference between "high flying" and "six feet under".

For future posts, please follow me at:  www.twitter.com/georgedeeb

Lesson #54: Incorporate Video Into Your Marketing Efforts

No longer is video an expensive medium, only used by, and afforded by, major brand marketers for their television advertising campaigns.  Today, video is being used by everybody and anybody, big or small, B2C and B2B, particularly for use on the internet, where it is easy and affordable to create, publish and distribute videos.  The primary uses for videos are largely around: (1) educational videos about your company; (2) educational videos about your products or services; (3) videos for advertising purposes; and (4) videos for viral marketing purposes.  We will talk about each of these uses, in the paragraphs below.

It has got to the point that website users are expecting to see a corporate branding video front and center on the home page of any company's website.  Gone are the days of the static, text-intensive "About Us" pages, and welcome the era of dynamic "story-telling" via videos.  Videos create emotion, personality and excitement much better than static text, and helps you to better communicate your corporate brand message.  And, a professionally-produced corporate video can can be produced for as little as $2,500, with many production shops fighting for your business (e.g., Switch Video, Vismo Media, How It Works Media, Kicker, PixelFish, Say It Visually).  There is even a crowdsource of video animators and producers called Wooshii, where you name your video desires and budget, and interested contractors submit their ideas to you (with you only paying for your favorite contractor, if you decide to move forward with them). 

And, corporate videos are not limited to videos within a video player, several companies are using video spokespersons to introduce users to their website.  So, if you are interested in this type of execution, there are several companies than can help you here, including I Speak Video, Website Talking Heads, Live Actor, Video Spokesmodel, Laser Stream Video, Your Website Spokesperson, Model2Web, Website Actor Live, VSP Worldwide and Tweople, to name a few.  And, these can often be produced at a very low cost (under $100).  So, check out these sites, and see the quality of their productions, models and story telling.  If you like what they have done for themselves, promoting their own business, you should like what they will produce for your business.

And, videos should not be produced only for your overall corporate brand message, you should figure out how to leverage it around all your products and services.  Nothing can teach a user how to use a product, or better explain the benefits of a service, than video.  And, the better you educate your consumers on the value of your offering, the higher odds they will convert into sales.  As an example, when I was at iExplore, we added this South Africa Tour Video, to our South Africa tour description pages, and we saw a 4x increase in leads and sales for that tour.  This four minute video did a lot better job of "dream creation", than one page of static text and one still photo could do.  Not only did it tell a "better story", it helped to better position the business as a trusted, high-end tour operator in a competitive space, which means a lot to consumers ready to plunk down $5,000 per person on a trip half way around the world in a foreign destination.

The third primary use of video, is around your marketing efforts.  No longer does a static banner ad cut through the clutter in terms of getting attention for your advertising online.  Consumers have a very short attention span, and a moving video tends to get their attention better than anything else.  So, where you can, use video ads in your marketing efforts, instead of static images.

The fourth primary use of video is for viral marketing purposes, to get the video seen by (and your product exposed to) as many people as possible, on YouTube or otherwise.  Here are a couple examples of the Best Viral Brand Videos of 2010.  And, with around 50 million views, one of my all-time favorites is the Evian Roller Babies.  But, this was obviously a lot more expensive to produce than the other examples.  That said, viral videos can be produced cost effectively as a startup.  My venture capitalist colleague, Andy Whitman at 2x Partners, told me that his startup portfolio company, Orabrush, was able to drive 15 million views with this Orabrush Viral Video for its tongue scraper that fights bad breath, of all things. 

As you will see, what do these viral video examples all have in common:  really funny humor or interesting content that people want to share with their friends.  So, if your product lends itself to something funny or interesting, maybe you will hit the social media jackpot with the next big viral video to spread over the web.  To stay on top of the best viral videos overtime, be sure you bookmark this Top 10 Viral Video Chart, updated weekly by Visible Measures and Ad Age with the most watched viral videos of the week.

If a picture is worth a thousand words, then a video is worth a million words, in our attention-deprived culture where nobody likes to read anything.  So, the earlier you embrace video, the sooner your marketing efforts will flourish.

For future posts, please follow me at:  www.twitter.com/georgedeeb

Lesson #53: Search Engine Marketing Strategies

As a startup, there is no more cost effective, targetable and trackable marketing tactic than marketing through the search engines (e.g., Google, Bing, Yahoo).  So, driving search engine traffic should rank very high as a  priority within your overall marketing budget.  Today, we are going to discuss the two primary search marketing tactics: (i) search engine optimization (SEO) for organic search; and (ii) search engine marketing (SEM) on a pay-per-click (PPC) basis.

But, before we jump into that, you first need to do a little bit of research as to what specific keywords are most important for driving traffic for your business.  Some businesses are very simple to market for, with only a handful of keywords they need to optimize for.  And, some businesses are very complicated to market for, with millions of keywords they need to optimize for based on the breadth of their product offering (e.g., think about every SKU available for sale at Amazon or eBay).  And, to make matters worse, you need to think through all the numerous variations and typical misspellings of the keywords, and include those in your efforts, as well (e.g., "startup consultant" different than "startup consulting", "Israel travel agent" different than "Isreal travel agent").

A great place to research all the various keyword options is the Google Search Term Suggestion Tool.   Here, you type is a keyword for your business, and it estimates the monthly traffic for that search term, and suggests other keywords that are similar to your keyword, that you may not have even thought about.  So, prioritize your keyword efforts around the highest trafficked keywords for your business.  Also, be sure to research which keywords your competitors are optimizing for at sites like Open Site Explorer (for organic traffic) and SpyFu (for paid traffic), to see if any interesting learnings there.

Now that we have decided what words we want to optimize for, we are ready to start our SEO and SEM efforts.  In terms of SEO for organic traffic, there are several things that the search engines are looking for when deciding what links to push to the top of their search algorithms.  This includes: (i) age of the site; (ii) size/reputation of the site; (iii) amount of backlinks pointing to the site, with your desired anchor key words; (iv) content density (e.g., amount of times that word is on the page); and (v) title tags, image tags and meta tags using your desired keywords.  This is just a few to mention, with content density on the page and backlinks from third party sites carrying a lot of weight.  So, all of this needs to be considered when writing the content and coding the pages of your website.

And, worth mentioning, although there are many services which can help you grow your backlinks, and there are many "black hat" tactics your developers can consider when coding your pages (e.g., content stuffing with hidden white text), you should avoid these efforts.  As the last thing you want is to end up blacklisted by Google and de-indexed from the results by trying to game the system.  Google is very smart to know when companies are trying to game them (e.g,. can see when backlinks are adding too quickly), so don't even go down that road.  Always use a very reputable SEO expert.

In terms of PPC traffic from SEM, there are many things you need to optimize for besides the list of keywords.  This includes: (i) your cost per click objectives for driving ROI; (ii) where the ads will display (e.g., in search only, or in related content pages too); (iii) what variations of the keywords (e.g., exact match or broad match); (iv) the copy used in the ads (e.g., title/descriptions/offers); (v) the landing pages used for the inbound traffic (e.g., to targeted/unique pages matching the keywords); (vi) any geographic targeting (e.g, users in specific cities or countries); (vii) any dayparting (e.g., display ads on specific days, or during specific time ranges) and (viii) your budget (e.g,. unlimited or capped each day).  So, as you can see, there are a lot of moving pieces to PPC that you need to optimize for to ensure a healthy and profitable campaign.  Here too, there are many reputable services and technologies you can use to assist you with your campaign design, management and optimization.

The most important thing for PPC marketing is to make sure you have a clear understanding of the relationship between paid clicks and the resulting leads/sales, to ensure you are driving a good ROI from your efforts.  So, don't spend full force out of the gate.  Do a bunch of testing to start, at various ranking positions, various CPCs, with various creatives, with various landing pages until you get the right mix for your business.  Therefore, it is critical you have a way to track all inbound leads/sales activity from this campaign (e.g., inbound tracking links on e-commerce bookings or email leads or call center surveys), so you know exactly how much revenue is coming from your PPC spend, to ensure you are covering your costs.

And, worth mentioning, certain keywords are highly competitive and are nearly impossible to drive an ROI (e.g., "travel" that is used for branding objectives, not ROI objectives, by Expedia and others).  So, you will either need to sacrifice rank (below #1, #2 or #3 position) for these types of words, or you will need to focus on more targeted words with much less competition (e.g., "Morocco hiking trip"), where you can profitably achieve a top three position within your desired CPC/ROI objectives.  And, there is no one right answer for all businesses.  A $1.00 CPC could be suicidal for one business and drive a wild profit for the other, depending on the industry and resulting sale economics.  So test, test and test again, until you get the campaign optimized for your specific business.

It makes sense to engage an employee or firm to help you with these efforts.  One, because you will not have enough time/focus to do this justice on your own.  And, two, because the "rules of engagement" are constantly changing, with the search engines updating their search algorithms all the time, requiring you to change your tactics over time.  Also, unless proven otherwise, it could make sense to engage two employees/firms for your search work, as the skills required for good SEO (e.g., tech coding and copy writing) are very different than the skills required for good SEM (e.g., online marketing testing and analytics).  It is very difficult to find both skills in one solution.

It is tough to summarize all the moving pieces around search marketing in one short lesson, but hopefully this high level tutorial was enough to point you in the right direction.  Good luck!

For future posts, please follow me at:  www.twitter.com/georgedeeb

Lesson #52: Viral Marketing Via Social Media

Although I consider myself an internet marketing pro, after 12 years in the industry, it is amazing how quickly the online marketing tactics change and your skills can go stale.  So, to make sure I was fully up to speed on the current trends in the industry, I enlisted the help of Katy Lynch, an expert social media consultant at www.SocialKaty.com, to help me create this post on best practices used today by viral marketers trying to drive word-of-mouth via social media, a very cost effective strategy for startups. 

First of all, why focus on social media (e.g., Facebook, Twitter, blogs) at all.  The simplest answer is:  there is nothing cheaper than driving new leads from word-of-mouth marketing, and social media has made it easier than ever to directly identify and engage with your customers and target audience.  And, with the current generation of social media analytics technologies, tracking a direct ROI from these efforts has never been easier.  Not to mention, with all the clutter from marketers these days, "likes" and "tweets" from your friends and colleagues carry a lot more weight in terms of stimulating interest and demand for new products and services.

Based on Katy's direct experience with clients (e.g., the Where I've Been travel site grew from zero to 145,000 Twitter/Facebook followers in 2.5 years from very inexpensive efforts), she believes that a successful startup needs to focus on the following five things in setting their social media strategies, and hopefully terrific viral growth with follow: (i) stay educated on the latest trends in the social media industry; (ii) create domain expertise within your own industry; (iii) identify and motivate brand ambassadors that help you spread the word; (iv) integrate social media throughout your entire user experience, not just in marketing activities; and (v) hire a social media expert whose sole job is to grow your business through these channels.  We will tackle each of these points in the below paragraphs.

Study The Latest Trends.  By the time this post is written, there may already be a new favorite tactic being used by social marketers.  So, it is important to stay on top of these key tactics.  As an example, the hot strategies today include the use of viral videos (like Evian's roller-blading babies), social gaming tactics (like Farmville) and customized Facebook company pages (like Coke).  The other key tactic being used today, is the use of hashtags within Twitter posts, to assists users looking for similar content within Twitter (just like users search keywords in Google).  Hashtags.org is a great resource to see what topics users are searching and to see what topics you should be engaging with for your business, to get in front of an immediate and targeted audience.

Create Domain Expertise.  People are more likely to spread viral messages from people they trust, or whom are experts in their field.  So, for example, Katy not only helped Where I've Been increase their follower base, she tried to position them as a domain expert in anything and everything related to the travel industry, whether it was directly related to their core business, or not.  So, when consumers would be looking for travel tips, news, forums or whatever, Where I've Been would come up within the results as an expert in the space, hence attracting a large follower base of passionate travelers.  A great way to position yourself as an expert on a topic, is to write compelling content on a blog, as I am doing right now in this post, hoping you forward these lessons to your colleagues (driving new leads for my business).

Seed The Community/Identify Brand Ambassadors.  You typically need a 100-1000 follower base, before viral marketing magic kicks in.  And, this base is the hardest part to build.  So, Katy recommends buying advertisements on Facebook around your targeted demographic to help get your base up to this level faster than you could on your own.  Based on Katy's history, it will cost you about $1 per follower, so budget $1,000 for Facebook advertising to get your base up to 1,000 followers.  In addition, don't forget to leverage any other in-house marketing lists you have, to help jump-start your efforts.  As an example, one of Katy's other clients used an in-house email list of 40,000 names to help seed 1,000 Facebook fans after only one mailing.

From there you need to identify and motivate your brand ambassadors.  This could be your most empassioned followers, continually singing your praises to their network.  Or, it could be third party ambassadors who are domain experts themselves (e.g., key influencers/bloggers in your industry).  Good places to identify these prospective ambassadors are: (i) from Google searches around your keywords; (ii) researching members of key Twitter Lists for your key topics, which you can search at www.Listorious.com; and (iii) www.invesp.com/blog-rank/ to identify key bloggers and domain experts by topic.  And, don't forget to reward your ambassadors for their efforts, with thank you gifts or other giveaways over time based on their activity.

Integrate Within Your Business.  Social media should not be a marketing tactic, in needs to be integrated into your overall user experience.  As an example, there needs to be "like" and "tweet" buttons around your core product pages on your website.  The reason social media-based games, like Mafia Wars and Farmville, built into huge successes with millions of users was the fact that each time the player played the game or reached a new level, the activity posted to their Facebook profiles, exposing the user's entire social networks to the game, driving viral word-of-mouth and new users for their business.

Hire An Expert.  Managing your social media efforts is more than writing a blog, tweeting on Twitter or posting information on your Facebook fan page.  You should constantly be looking for new followers and trying to figure out how to create a "personality" for your business.  And, the odds are, you as a startup executive are going to be too busy to do this any justice on your own.  So, hire an on-staff expert, or engage a third party agency, to help you focus on these efforts full time.  And, the advantage of an agency is they have access to and expertise with the sophisticated engagement and analtyics software you will need to implement and track your ROI from this campaign (e.g., TweetDeck, HootSuite, Twitter Analytics).

In addition to Katy's list, I would add a couple other things.  Firstly, the more you can build your entire business model around word-of-mouth driven engagement, the better.  The one example I am specifically thinking about is Groupon.  The whole idea of a 500-person tipping point for the deal to go through, bound by a 24-hour ticking clock before the deal expires, was pretty genius.  That means every day, users are forwarding deals to all their friends trying to get their desired deal fully subscribed, day after day.  It created a viral marketing machine, and the rest is pretty much history.  That said, don't fool yourself that viral marketing was the only key to Groupon's success.  Groupon was also spending millions of dollars of marketing each month to help drive their meteoric growth.

The second thing I would add is that there are some great tools out there to help you forecast the timing and scale of your word-of-mouth efforts based on: (i) how engaging your message is (e.g., what % of forwarded information gets acted upon); and (ii) the viral cycle time (e.g., how much time before the recipient forwards the message to their friends).  Check out this terrific Viral Growth Model and Tutorial by David Skok, a five time serial entrepreneur turned VC at Matrix Partners.

Thanks again to Katy Lynch, for her terrific insights.  Be, sure to reach out to her at www.SocialKaty.com for any additional help from here.

For future posts, please follow me at:  www.twitter.com/georgedeeb

Lesson #51: No Public Displays of Rejection

Startup employees look to their CEO's for inspiration, communication and any hints of "perspiration", hanging on every word and action of their leader, as their primary source of information as to whether or not the business is in trouble, or not.  When an employee is paddling along with you in a "river raft adventure" of a startup, they want to make sure their lifeboat is not taking on water.  And, the CEO is typically the first person to know when things are not going as planned, and frankly, whether or not the business is going to survive and the employees will need to be looking for new jobs to pay their mortgage.

Back in Lesson #13, we talked about Creating the Right Culture for Your Startup, including having an open-style of communication between the CEO and the employees for the good, the bad and the ugly.  During difficult times, you need to learn how to communicate any bad news to the team in a way that will keep them informed, but motivated and confident at the same time.  The last thing you want is your staff to become demoralized, when they need to be energized, putting an already struggling business into a death spiral. 

What this typically means for a startup CEO is: no "public displays of rejection".  A staff seeing their leader worried, depressed or losing confidence is they equivalent of their swallowing a poison pill.  When a staff lives and breathes with eachother, they know everybody's specific habits, personality and style.  And, any change from the norm from their CEO, can often set off red flags with the staff.

So, when communicating with the team, use the same tone, personality and facial expressions you always would, in both good times and bad times.  This especially means keeping up your energy, confidence and eye contact, regardless of the problems at hand.  And, do your best to maintain your normal routine:  keep all normal meetings with staff, do all the normal birthday celebrations, continue to keep the door open to your office, keep a normal presence in the office, don't come across frantic in your daily activities, etc. 

A consistent and confident captain, will instill trust and confidence in his shipmates.  That said, your staff are smart people, and will typically know when confidence is unjustified and will not appreciate you trying to sell them a bunch of bull.  So, keep it honest at all times, and upbeat where you can.

As we discussed in Lesson #29,  iExplore was staring over the edge of the abyss after 9/11/01.  But, despite how ominous it looked that the business could survive, I was able to convince the core staff of nine employees to "hang in there", with them willing to work without any current income for the four month period it took me to raise the additional capital required to resume normalcy to the business.  I had built up their trust over the years (which was key, never promising anything I couldn't deliver, and successfully navigating the business through prior bad times).  So, if I said "trust me, we were going to get through this", then by George (pun intended), we were going to get through this, and all hands on deck to batten down the hatches.  It would have been much easier for these employees to start looking for a new job, which I even encouraged them to do, as a back-up Plan B to protect themselves.  But, we were all clear, saving iExplore was Plan A, and we were all on board to give it the college try, despite any personal sacrifices we needed to make.

And, it was largely due to the delivery of the message.  Had I walked into that room with my head down, crying with my tail between my legs (how I really felt), it would have been game over.  Instead, it was business as usual, with an open and honest message of the fact we were in a difficult position, but had a clearly communicated plan on how we would get through it.  And, the fact I acknowledged their personal fears of them potentially losing their jobs if the business went under, by allowing them time to interview for new jobs for Plan B, deepened their trust in me and had them wanting to work with me that much harder.

So, keep an even keel in both smooth and choppy waters, regardless of how much pressure or stress you may be under during the bad times.  If you can avoid letting your stress or fears pass along to your team, the odds of you successfully getting through those bad times just increased ten-fold.

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