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Let’s step back for a moment from the practical and expedient steps that mark an entrepreneurial company’s formation and wear a philosophical hat to examine the deeper motives that drive entrepreneurs toward building companies. As we all know, and surely realize, many people often have lofty ideas and set lofty goals. There is a greater purpose in much we do, even though it is not always or immediately apparent. Much of what we do can appear to be a response to a variety of situations, but historians and philosophers often see a grand, mighty purpose—a grand mission and a vision—in much of human endeavors.

Before we dig deep into our “selves” and into our entrepreneurial pursuits to see what greater motive lies beneath, it might be a good idea to understand why we need to undertake this exercise at all. Why is it important to recognize our mission, vision and values? How can this help our entrepreneurial companies?

Even if we were, for a moment, to overlook the larger philosophical purpose, such an exercise has enormous practical benefits. A vision statement, for example, projects a simple, elegant and still lofty goal for the company—something that will stand the test of time. Microsoft, for example, projected the vision of a PC on every desk, obviously running the company’s software. It certainly was not a vision that was going to be realized anytime soon. Not even today, over 25 years after Microsoft was born, is that vision real. It is a grand vision that has stood the passage of time.

Similarly, Cisco revealed a vision of connecting every PC to another. These are stunning statements that inspire investors, employees and consumers alike. So there is great value in “discovering” our true goal and articulating it in simple terms, much like a great tag line in a commercial. Only, this one is long-lasting and likely to be synonymous with the company. If employees and management alike lived by it, then the vision statement has been worth the effort.

Now that we know the true potential of a vision statement—and indeed the mission statement—the question is: How do we go about identifying these goals and articulating them to the rest of the world?

Vision Statement

A vision statement is the first, and most powerful, of a series of three statements that outline the overall purpose of a company. Vision statements are crafted to identify a single over-arching goal of a range of activities. Typically, a company produces one or more products or offers a range of services. Good companies with a clear vision tend to undertake those activities that resonate with that goal. Conversely, a company’s activities can all be traced back to a common goal, which is its vision. This happens because companies examine all new ideas for expansion against the prism of their vision to make sure they are in line with the company’s larger goal. Take the previous example of Microsoft, any new software it produces is in line with its vision. Or in the case of Cisco, any computer networking product or software it creates is in line with its vision. One would rarely see these companies do anything else.

Here are some key steps toward preparing a vision statement:

1. Great Leaders Show the Way. Good leadership is all about showing the way. Entrepreneurs need to provide inspiring leadership. They need to recognize this and work their way to a vision.

2. Introspect. Ask yourself a number of questions to understand what you are doing and why. Why did I start this company? What do I really do for my customers? What is the ultimate goal of my enterprise?

3. Don’t Be Modest. Often, entrepreneurs might be shy of setting or expressing a goal that might look too lofty. I am sure even Bill Gates may not have set his grand vision of having a PC running Microsoft software on every desk when Microsoft was a struggling start-up. A vision statement is not an immediate goal. Think of it as a dream. Even if it is never attained, it is worth cherishing.

4. Brainstorm: You can’t really sit in your ivory tower and come up with a vision for the company. It takes much more than that. It requires discussion and debate, and the exchange of ideas. Many entrepreneurs organize workshops in which co-founders, investors, employees and even consumers contribute their ideas. These thoughts can be “distilled” to create a grand vision for the company.

5. What the Company Does. Many times, what the company should be or provide offers a vision. For example, an organic food company could state it will “supply healthy food to all,” as its vision. A hospital chain could consider the vision: “Best health-care for all regardless of social status.”

Mission Statement

A vision statement reveals a future; a mission statement defines a purpose. A company’s mission statement provides a rationale for its very existence. To better understand the concept, let’s look at some mission statements.

Google

“Organize the world’s information.”

3M

“To solve unsolved problems innovatively.”

Merck

“To preserve and improve human life.”

Wal-Mart

“To give ordinary folk the chance to buy the same thing as rich people.”

Walt Disney

“To make people happy.”

IBM

“We want to be the best service organization in the world.”

Pfizer

“We dedicate ourselves to humanity’s quest for longer, healthier, happier lives through innovation in pharmaceutical, consumer and animal health products.”

Dell Computers

“With the power of direct and Dell’s team of talented people, we are able to provide customers with superb value; high-quality, relevant technology; customized systems; superior service and support; and products and services that are easy to buy and use.”

Federal Express

“We will produce outstanding financial returns by providing totally reliable, competitively superior, global, air-ground transportation of high-priority goods and documents that require rapid, time-certain delivery.”

As the above examples suggest, mission statements lay out a goal—a specific goal. Note how it is different from the vision statement. Let’s take the example of Google. Its mission is to “organize the world’s information.” Its mission might be a world in which information is perfectly organized. Similarly, Disney’s mission is “to make people happy;” its vision might be “to create a happy world.”

A mission statement is a clear and precise description why the company exists in business. It often is a pledge. Like Google’s, it can set an agenda; or like Merck’s or Wal-Mart’s it can be a promise. Note that Dell Computers and FedEx have more elaborate mission statement than most others. It is not necessary that a mission statement should be a one-liner, or a short phrase. What is more important is that it is truly in line with the company’s goal and values, and lays a path for all its employees to follow.

Mission statements can include social goals and set an ethical position, or differentiate itself from competitors. A general rule is to avoid self-praise or a comment on the company’s product or service standard. It is enough to set that goal, as IBM does in seeking to be “the best service organization in the world.” Note that it doesn’t claim to be the best.

Typically, a mission statement can be divided into three major components:

1. Company’s Aim

2. Business’ Description

3. How It Serves Consumers

How does one come up with a mission statement?

Many consultants provide this service. By interacting closely with the entrepreneur or management team, consultants can help you organize your thoughts and discover your innermost goals, which can then be expressed in a precise manner in the form of a mission statement. Companies like Franklin Covey provide a “mission builder” online http://www.franklincovey.com/msb/ —a software program that guides you by asking a series of probing questions before offering a suitable statement.

How many times have we heard of businesses that have been started in the founder’s garage? The move to office space marks an important milestone in the growth of a company. That, as many probably suspect, can be daunting. From leasing office space to setting up a computer network and meeting payroll, there are many tasks that need to be done. Many have to be done regularly, day after day, and some on a 24/7 basis. These tasks require a level of experience that entrepreneurs rarely will have, or care to acquire.

For example, how many of you are likely to know the “nitty gritty” of leasing office space? Besides, these are distracting to the entrepreneurs’ larger goal of building one’s startup. Continuing with the previous example, after all most of you are not aiming to enter the real estate business. In the circumstances, what can an entrepreneur do to ease the burden of these essential tasks and move on with the larger goal of building an entrepreneurial enterprise?

Fortunately, there are good choices. Entrepreneurs can hire space in so-called business incubators, which take care of a startup’s every need. Or they can hire a project manager for a bunch of tasks such as setting up an office and computer systems, and outsource another set of tasks like payroll and accounting. Also, a lot of office equipment including computers and computer servers can be leased.

Entrepreneurs need to examine these choices in the light of what they seek in terms of costs, administrative control and perhaps the ability to scale before determining what is best for them. Let’s look at each of the three choices and consider the advantages and disadvantages.

Incubators

Just as medical incubators help a newborn survive, business incubators provide the tender care entrepreneurial companies require. Over the years, incubators have evolved into a lot more. They not only help entrepreneurial companies survive but serve as a launching pad for young and small businesses. Most offer promising startups everything it takes to succeed. The services range from simple front-office services to backroom processing, and hosting of computer networks to hosting of computer servers. Besides taking care of the routine business needs, some incubators provide strategic assistance to the entrepreneurial company. This can include financial planning, venture capital funding, specialized marketing and legal expertise, and management consulting, among others.

Many entrepreneurs benefit immensely by starting life in an incubator, especially because they can remain focused on their companies instead of worrying about everyday administration. Some startups will move out once they outgrow its utility, or when it becomes imperative to build their own facilities.

Entrepreneurs should favorably consider incubators especially because the early stages of setting up a business is truly challenging and can be time-consuming and frustrating to one inexperienced in these tasks. Statistics suggest a significantly higher rate of success for startups that begin at an incubator.

However, incubators come at a price. This is especially true of the good ones that provide strategic guidance. These incubators have a portfolio of companies that can leverage off one another. They link entrepreneurs with powerful investors and advisers, and can lead to sales and marketing contacts. So much so, some incubators provide a lot of “intangibles” than other investors do. For providing these services, most incubators seek a share of equity. Remember that most incubators examine the prospects of entrepreneurial companies before accepting them.

Some entrepreneurs may not wish to part with equity for a variety of reasons. For example, an equity deal with an incubator could complicate plans for venture capital at a later stage. For such entrepreneurs, this obviously is not a good option. But they still can consider business parks and barebones incubators that offer a wide range of essential services required for entrepreneurial companies.

For entrepreneurs willing to shed equity to an incubator, the decision should be examined carefully with the help of lawyers in order to avoid difficulties later. Also, entrepreneurs who seek to raise any capital through an incubator’s investment fund must carefully evaluate the advantages and disadvantages, and estimate its real cost to the company. Of the three options we listed at the top of this chapter—incubators, leasing and outsourcing—incubators are likely to be the least expensive but could well be the most cost-effective, depending on the traction the incubators provide to a young company.

Doing It Yourself

Many entrepreneurs choose to set up their own offices because it is clearly a cheaper alternative, when compared with the previous option—incubators. This they can do by using initial funds, or angel investments, or even venture capital. Most entrepreneurs who choose this option have better cash flow than others, or have pressing needs that are not typically met by the other alternative.

So entrepreneurs would lease office space, buy the furniture and even set up their own computer network, to start with. This happens at an early stage of the company, probably when the founders move out of their garages. But as they go along, entrepreneurs need to hire employees—a front office receptionist or office manager, for example—to set up and manage a number of things and set up a system of controls for most everyday functions.

Then there are the regulatory and other requirements that need to be met. So entrepreneurs need somebody to manage the finances and maintain records and a lawyer to take care of the legal processes such as incorporation. Fortunately, in the modern world, a lot of these tasks can be outsourced, allowing entrepreneurs to focus on building their company. Payroll, accounting, call centers, technology support, hosting of Web sites and computer servers, etc. all can be outsourced to third party providers. One only needs to oversee the outsourcing vendors.

Many entrepreneurs might need project managers, real estate advisers or brokers, and architects if they plan to build their own offices or labs, or expand these on a regular basis. Entrepreneurs who choose this option can independently decide whether to buy or lease computer and other office equipment, depending on such factors as cash flow and redundancy required. The key challenges in deciding to do your own, or build your own, are several. For example, a small entrepreneurial company needs to have the ability to quickly scale up its operations as it grows. It needs to add computers and servers, and create more space for more employees. It needs to balance costs with scalable infrastructure in order to arrive at optimal choices. The advantages to entrepreneurs are the ability to plan these better, when compared with simply using an incubator’s facilities, and potential gains from economies of scale.

Equipment Leasing

Entrepreneurs can lease equipment, instead of buying outright, to reduce the cash outflow. For startups with no revenues, “small ticket” leases of $100,000 or less are feasible on the personal credit of the founders or owners so long as they can make the monthly payments.

In fact, most small businesses use equipment leasing. Equipment leasing can be thought of as a loan in which the lender buys and owns equipment, and merely “rents” it to a company at a flat monthly rate for a specified number of months. At the end of the lease, the company may purchase the equipment for its fair market value (or a fixed or predetermined amount), continue leasing or return it and lease new equipment. Besides saving precious cash, entrepreneurs can avoid obsolescence risk. Leasing also finances the “soft costs” associated with equipment purchases, such as installation and training services. Still, leasing is generally more expensive than bank financing, but other advantages including easy availability and simpler procedures make it very attractive to small businesses.

Let’s look at some tips that will help entrepreneurs handle negotiating sessions with confidence and success.

The best of us can sometimes lose perspective, be unmindful of certain aspects of the business, or be swayed by certain issues to the neglect of others. So it is important that entrepreneurs don’t allow themselves to be caught alone with one or more of investors team when negotiating. Get your lawyers, advisers, fellow entrepreneurs or management team on your side and in the same room before you begin negotiations.

Never over the Phone

Don’t convert a phone call into a negotiating session, not even when you think you are prepared. Entrepreneurs should not put additional pressure on themselves by carrying on a conversation that is actually a negotiating session. In hurried calls, entrepreneurs are likely to make hasty decisions or commit themselves to a position that may be far from ideal. Be polite but firm and seek face-to-face negotiations.

Preparation Is Key

Remember that while this might be your first session, or maybe the first few, investors are far more experienced. Negotiation is an art. While entrepreneurs can’t expect to become master negotiators, preparation can help a lot.

Set Goals

Depending on what you are negotiating, set goals and a broad range between which you are willing to negotiate. For example, how much of the company are you prepared to give away? It helps to set a range before you begin negotiations.

Start High but Be Realistic

A good negotiation strategy is to start high, without being ridiculous, and show a readiness to make concessions. It will reveal an entrepreneur as ambitious but practical, and keen for a deal. At the same time, don’t succumb to sharp bargaining.

Avoid Deadlocks

A good negotiator can see a deadlock before it really emerges, and has a way to avoid them. On many occasions, it is useful to defer negotiations on a particularly thorny issue, maybe to the next session, and find common ground on others. This gives both sides the time and the opportunity to do more home work and/or take a more dispassionate view.

Be a Good Listener

Good negotiators are good listeners. Be alert to every word and don’t let your attention slip.

The single most important trait you need to possess or develop is patience. Deals with investors do not take place in the matter of a few hours. They happen over several negotiating sessions. Give yourself enough time and space to carry out the talks.

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I am sure many of you heard about an elevator pitch. What really is it? And why should we know about it?

An elevator pitch is so called because it is something you deliver to a potential investor as you travel in an elevator. We know how long that can be. The ride to the top of Chicago’s Sears tower takes an estimated 51 seconds. On the demolished World Trade Center in New York, it would have been a little over a minute. You get the idea. Give or take a few seconds for halts, and a few more perhaps as you keep pace as your investor hurries into the hallway and then onto an office. You might be able to squeeze in a maximum of 2 minutes, if you are lucky and your target is slightly indulgent.

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