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Flexible Worker Model by Next Step | posted: 05/24/2016
“The Age of the New Worker Model: How to Safely Navigate Legal Obstacles and Reach Your Goal of Flexibility and Scalability”
Workers and businesses alike favor flexibility and independence. Work only when you want and how much you want; work hard and play hard. Businesses want to hire based on immediate need with coverage around the clock – scalability is key. The rise of the new worker model is hampered by dated laws that fail to recognize and adopt to the new model. Learn from the panelists how to achieve scalability and flexibility in the U.S. and abroad; when to hire independent contractors vs. employees; when, how to safely classify a worker as exempt; discuss recent industry examples and trends.
Challenges of the Independent Contractor Model
A strong message from the panel was that the 1099 vs w2 is a very tricky landscape to navigate. Darren Shafae spoke in detail about the difficult transition from a 1099 shop to a W-2 shop following a painful IRS investigation. His business is now once again doing well but it was not easy. The clear message was “when in doubt consult with an attorney,” as the mistakes can be very costly and detrimental to your business.
The basic issue is whether or not you as a business owner have misclassified your workers as 1099s when they really are being treated as W-2s. According to the IRS, there are several factors that are considered when deciding on whether someone is a W-2 or a 1099, including do you determine when, how and where they do their work? Do they have other clients? Do you provide them with job-related equipment or do they provide their own?
Important to note for the 1099 shops out there is that there are several government entities that can make decisions about your business including the IRS, the EDD, the California Labor Commission and more. Even worse, the EDD has a pattern of coming back to previous offenders since they already know your biz model, it’s easy pickings.
There have been several significant misclassification cases in US recently:
- Sacramento Bee
- Uber (this highly visible case goes to trial in June 2016, and is being carefully watched by many)
At risk for government entities is a significant amount of lost tax revenue. In 2009, employee misclassifications cost the federal government $2.7B, Simone noted. Improper misclassification of employees is considered fraud and subject to substantial fines and criminal charges. For example, California Labor Law states a willful misclassification has a $5-15K penalty per employee. The government also wants to protect employees from wage theft, such as unpaid overtime, sick time, double time, breaks, etc.
Additionally, every 1099 shop is at high risk of painful, expensive and distracting audits for misclassification. Sometimes these audits can cost the business. There are some who perceive that hiring 1099s gives you less liability, but as an employer you are always liable.
In many European countries, such as the Netherlands, independent contractors are growing rapidly and becoming more regulated, making the landscape even trickier in some countries.
Benefits of the Independent Contractor Model
Despite the risks, a recent Forbes article reported that 100% of job growth in the US over the past decade was through contractors and temps.
The panel discussed the benefits of hiring 1099s, including:
- It can be less costly (25%-30% cheaper than W-2 workers)
- There is lots more flexibility
- Scalability is easier (clients don’t want to pay for the time a consultant sits on the bench)
- It creates the ability to hire a very specific expert skill set
- Some believe employee engagement is higher with independent contractors (I am one of those, given that employee engagement is reported to be at 31.5% – why pay for 100% of someone you only get 40% out of??)
- It allows for a leaner organization (clients want their money focused on results, not employee benefits!)
- It creates tremendous flexibility that is very valuable, especially for millennials, women and working moms, who are trying to balance a lot of responsibilities.
Women, whether moms or not, still do the vast majority of family and home care, with recent studies showing that on an average day, 83% of women do housework vs. 65% of men. Regardless of their paycheck size. And when “43% of highly qualified women with children are leaving careers or off-ramping for a period of time,” according to Sheryl Sandberg in Lean In, the typical corporate environment does not provide the kinds of flexible arrangements needed for women in their 20s/30s/40s. Beyond that point, she probably ain’t coming back to corporate typically once she leaves!. A 1099 world usually is structured to be more flexible, enabling more women to participate in the workforce and make an impact in the economy of their families and communities.
There is also one very important point about 1099s that must be taken into account. A typical 1099 worker is a totally different mindset from the employee mindset. Many of the folks who are 1099s would never be willing to become W-2s. Millennials and women, especially working moms, in particular enjoy the flexibility and freedom of 1099 work model. They use the flexibility to travel between gigs, take care of children, parents, and sometimes even husbands. There are a world of options available to 1099 workers that are simply not yet possible in our current W-2 work models.
Solutions and Tips for Implementing Either Model
Of course, the 1099 model doesn’t work for everyone, you really have to have the right mindset. Many choose to work the W-2 model, since they need the (perceived) job security and benefits that comes with that such as health insurance benefits and retirement plans.
So what is a business owner to do? How do we navigate this landscape? First of all, if you are using the 1099 model to run your business, understand the boundaries clearly (see the IRS link above). Here are some of the highlights of the key criteria when evaluating misclassification cases:
- Does the worker have control over work and work environment?
- Are the results produced on their own or do they need direct supervision?
- Do they use/own their own equipment?
- Are they providing a specialized skill?
Very important point raised by the panel was that you are not protected or exempt from misclassification when hiring from agency. Some businesses have tried this and it has not worked out well (eg., the UC Berkeley janitorial services case).
As a final point, and one also echoed in the Forbes article above, one size does not fit all we need both types of workers to keep the economy growing and all types of workers engaged. The challenge for us is how do we create a universal safety net so that medical and other benefits are not tied to only some workers, the W-2s , in our new and evolving gig economy?
Forget The Bullship Start with Selling! by Next Step | posted: 04/12/2016
Don’t focus on the bullshit, focus on the reality. Next Step’s team strongly agrees with Guy Kawasaki regarding the top ten mistakes of entrepreneurs.
Mistake 1: Too Big Numbers. Trying to magic all of your numbers and talking about getting “only 1%” of some enormous, billion dollar market. Instead, calculate from the bottom up. Prototype your product, get customers, and start growing it. Investors want to see the success you have now, not listen to a bunch of calculated stats about where you might be someday.
Mistake 2: Scaling too fast. “I have never seen a company die because it couldn’t scale to meet customer demand” . Don’t think you need to begin by supporting the mobs of people you haven’t acquired yet but might (see Problem #1). Instead, “eat what you kill.” Focus on SELLING what you have, and then scale when you really need to do so due to customer demand.
Mistake 3, 4, 5, and 8: Not focusing on selling to paying customers. Focusing on the wrong things: your partnerships, your pitch, your patents, and your slide deck. In short, focusing on the bullshit. Investors care about your revenue and customer adoption of the product. So put your effort into the prototype, get sales, and present what you actually have DONE ie revenue and customer adoption.
Mistake 6 Lack of Adaptation –instead of proceeding serially, proceed in parallel.. In the real world, it doesn’t go: raise money, then hire team, then build product, then make money, and now go public. In reality you must do those things all at once. So get used to it. Learn to work successfully in parallel.
Mistake 7: Think you’re going to retain control. As soon as you take outside money, as soon as you have outside investors and you’re going to lose control. But, Guy claims, “control is overrated.” If you have a large percentage of a company that fails, who cares? “It is much better to own 0.05% of Google than 51% of a piece of crap.” So instead of clutching the purse strings, “make a bigger pie.” Grow your business and you’ll be able to share success with your investors.
Mistake 9: Hire people like you. Instead hire your complements. You’re white and male? Hire a woman of color. You’re young? Hire someone older. Hire the skill you don’t have, like experience or a diverse perspective.
Mistake 10: Expecting investors to be friends. “They want to give you a dollar and get fifty back. You are a tool, you are a means to an end.” Yeah, the investors told you they believe in you, they love you, they “invest in people” – but in the end, they care about the success of your company, and about how much money you can make them.
So what is the secret of success in Silicon Valley? Focus on gaining paying customers for your product and building your team.
Provided by Jennifer Vessels, CEO Next Step, Silicon Valley based consultancy with an Oslo branch. Next Step improves revenue results for Norwegian and global companies as they launch, expand, scale and succeed in international markets through their 40 person team across US and Nordic.
What Makes Silicon Valley Work: Building an Innovation Culture by Next Step | posted: 04/08/2016
15 April 2016 15:00 onward – registration via http://oslointernationalhub.com/
This interactive 90 minute workshop will provide insight into the key qualities, elements and values that blended together drive success in the innovation capital of the world ie Silicon Valley. Led by Jennifer Vessels, CEO of valley-based Next Step, the interactive and engaging session will provide participants with opportunities to share ways they can apply concepts from Silicon Valley to their own work and lives in Norway.
Key areas to be covered include:
- What really makes Silicon Valley tick
- Role of funding and ownership
- Top 10 keys for Success Silicon Valley Style
- How can Norwegian international business people leverage Silicon Valley values here in Norway
Jennifer Vessels inspires business leaders, engineers and global teams to innovate, transform and grow. For more than 30 years, she has passionately led technology, consulting, consumer, public and sustainability companies revenue and profitability growth – delivering over 300% improvements in market value. Prior to founding Silicon Valley based Next Step in 1998, Jennifer led Tandberg’s international expansion culminating in launch of Tandberg USA in 1997. She is a highly sought-after speaker for Stanford Executive Education, GartnerGroup and global conferences on innovation, globalization and leadership as well as a provactive facilitator of leadership, sales and innovation workshops.
Jennifer holds a MBA from San Jose State and a Masters of Occupational Psychology from University of Oslo.
Selling as Customers Want to Buy by Next Step | posted: 03/29/2016
Buyers have become more knowledgeable and empowered. Information and experiences among buyers are shared freely through the ever-expanding world of social media. More and more people are becoming reliant on reviews and recommendations made by other buyers who have just completed the buying experience. In an effort to reach new markets and promote their products, comprehensive and detailed information about products and their functions is almost universally available. The new process of buying has put the greatest power into the hands of the buyers, not sellers. This new power is being exercised forcefully and mercilessly.
The one thing that hasn’t changed is the way most sales people sell. For many sales people it’s a one-way conversation driven by a PowerPoint. “Let me tell you about my products and some of their key features………………” Since the customer has already done their Internet research, inquired via social media with their peers, and perused blog posts to understand others’ experiences, we are woefully behind them. Many customers will believe we’re wasting their time.
To accommodate the new world of buying, a new world of selling must emerge. Just as dinosaurs became extinct because of their inability to adapt to the changes in the environment, sales people who cannot adapt will suffer the same fate.
In today’s world, customers assume that you are knowledgeable about your products. That’s the cost of admission into their office. What they also expect now is that you will learn about their business, how it operates, and what challenges they are facing. They expect you to use your product expertise to tell them how your products will help them lower their costs, increase their productivity, streamline their business processes, increase their revenue, or improve their competitiveness, among other things. They expect you to be more of a business person than a supplier of technical information about your products. If that’s all you provide you can be replaced by a web site.
The key to becoming that salesperson lies in becoming skilled in solution selling processes and techniques and adept in using the solution selling tools that are readily available.
The Customer’s Buying Process
“By definition, a process is a systematic series of actions, or a series of defined, repeatable steps intended to achieve a result. When followed, these steps can consistently lead to expected results.
A sale is a series of defined repeatable steps that, if performed well and consistently, will lead to expected results. A sales process defines and documents those end-to-end steps that lead to increased sales productivity”.
The reason to have a sales process is that it provides everyone involved in the sales effort with a roadmap of what to do next. This supports a well-coordinated effort which leads to a higher probability of success.
While sales people are laser-focused on their sales process, customers are engaged in their own buying process. Many sales people treat the customer’s buying process as a black box. They put a proposal in one side and hope a purchase order comes out the other side. What happens inside the box is a mystery. Sales competence requires that sales people understand the process their customers go through in making buying decisions. The selling efforts should contribute to the customer’s efforts in determining why buy something, why buy it now, and who to buy it from.
Buying processes vary widely. But one thing is certainly true. Most customers’ buying processes are more extensive and complex than sales people realize. The process also starts long before sales people are brought in to pitch their wares.
What Grabs VCs Attention for Investment? by Next Step | posted: 03/16/2016
After receiving initial seed or friends and family funding to build your offering and gain initial customers, you are ready to attract your next round of venture investment. US investors, which account for nearly 70% of the total global venture capital, may be very attractive to you. However, they receive thousands of business cases and hear hundreds of pitches each week.
If you have the opportunity to pitch to or meet a VC in the US, it is critical that your presentation demonstrates that you are:
- Experienced in building a successful company
- Bringing forward low risk opportunity that can deliver a high return within 3-7 years
As the VC listens to you, he or she will be listening for:
- Opportunity for profitable return with minimal risk… You need to demonstrate there is real financial benefit at exit.
- Revenue – a strong and sustainable revenue stream.
- Profitability and/or a clear path to breakeven.
- Does the company / offering solve a real, recognized customer problem?
- Founder is self-aware, open to feedback and willing to test a variety of product concepts and paths to market to achieve success.
- Possible synergy between this company /idea and others in their portfolio.
- Viable market size to drive a profitable return – tampered with credibility of the company’s ability to capture an acceptable share of the total addressable market.
- Founders’ domain expertise and experience (along with network and knowledge of the target customers and their issues).
- Has the leader / entrepreneur and this team successfully built a company and had a lucrative exit in the past?
Gaining investment from a top tier venture capitalist can provide the power and substance for long term growth. However, gaining enough interest and attention of a VC requires preparation, practice and insight into the specific interest areas for each person to whom you pitch.
Grinding It Out In Silicon Valley by Next Step | posted: 03/03/2016
During the Global Startup Grind Conference in Redwood City CA, leading investors including Marc Andreeassen, Tim Draper and Vinod Khosla shared insights, success stories and advice with thousands of entrepreneurs. Key highlights from the two days are as follows:
- Tide is turning with reduction in valuations and capital
After strong post-recession growth in funding and valuations, ‘the tide is going out’ potentially leaving behind many dying unicorn companies. While many factors are contributing to this tightening of capital, recent post-IPO valuation declines (Zyna, GoPro, Box) are leading to a bleak outlook for exits in 2016, hence a restriction in capital for new investments.
- Revenue trumps investment
While always important, a strong and sustainable revenue stream is now essential for success (or investment). In fact, the act of seeking investment is now considered lack of success. Founders should put their time into acquiring paying customers not investors.
- Monetization of real pain drives success
To drive sustainable, profitable revenue, entrepreneurs (and leaders of all companies) must ensure they are uniquely addressing real customer pain (with severity, frequency and high impact) while delivering quantifiable (monetized) customer value.
- Black-striped unicorns with bootstrap profitability take control
The entrepreneur who takes funding gives up ownership (and control) of the company and idea. Through focusing on revenue growth, while minimizing expenses SLACK, Basecamp and other ‘black-striped unicorns’ have built profitable businesses without Series A funding. The resulting profitable companies fulfilling the founders’ dreams and passion are now lauded as more successful than the ‘high valuation’ paper unicorns.
- Test, iterate, repeat for lean, sustainable success
Today, the ‘lean company’ concept of building a minimum viable product, piloting it with real customers, gaining feedback then repeating the process to gain revenue and market share is essential for success.
- Pivot forward
If your company hasn’t achieved real market traction (sustainable revenue, growing demand) within two years (at most), it is time to move in different direction. Either pivot (change direction) to a new product to solve the customer issue you started out to address, apply the technology to a new market or pivot the full team to build a new company.
- Heads-Up: Founder as Chief Sales Person and Recruiter
During the first year, the primary role of the CEO should be customer attainment – getting to revenue. The second priority is seeking and recruiting great talent, which should require 30-50% of the CEO’s time and capacity. Great companies are built through revenue and people (not investments). The successful founder knows how to balance these ‘heads up’ requirements with the ‘heads down’ oversight of solution development.
- Self-awareness critical for entrepreneur sustainability
Leadership of a business from startup through growth and eventual exit requires many diverse skills. The entrepreneurs most successful in guiding their company through the journey are ‘self aware’ and willing to hire others with skills and perspectives they may be lacking. By building a complementary team, seeking advice and addressing feedback, they can develop into the CEO role – which may significantly improve valuation of their company.
- Culture of Employee Mindfullness pays off
While Silicon Valley is known for ‘round the clock’ company dedication, today’s leaders advise building a culture that demonstrates employees are valued – including recognition of free time, holidays and family commitments. By providing employees with time and encouragement of mindfulness (including life outside of work), companies can engage, retain and gain greater results from dedicated employees.
- Grind through 5-10 years for success
Whether bootstrapped or venture funded, entrepreneurs need to be prepared to ‘grind it out’ with long days, frugal use of cash and attention to customers and employee – for the long term. While UTube (18 months to acquisition) successes can still occur, the current expectation is that building a successful company can require 7- 10 years (and possibly one or more pivots) before an exit.
From StatupGrind, it is clear there are great opportunities ahead for entrepreneurs and high growth businesses. However the path to success today is not a clear ever idea backed by investors to gain a unicorn-like $1 billion valuation. Instead, it is through monetizing a unique solution to a real problem and building a team and company to deliver sustainable profitability.
Provided by Jennifer Vessels, CEO Next Step. For more information on our different events or events we participated in, see www.nextstepgrowth.com
Top Unicorn Success Drivers by Next Step | posted: 03/03/2016
All can learn from unicorn growth
By achieving $1 billion market valuation within 5 years of founding, unicorns such as Uber, SnapChat, DropBox and Zenifits have shaken up traditional markets and investor expectations.
What drives these companies’ success?
- The value is often in the business model of recurring revenue with high capital efficiency and assets.
- Strong customer engagement through easy adoption, positive customer experience, personalization and social value attraction.
- International growth leveraging diverse ideas, teams and alliance for global success.
- Experienced, educated team using a collaborative approach.
- Deliver value to enterprises or consumers by addressing customer problems.
While unicorn status may not be your goal, the following success drivers can improve your business:
- Business model with recurring revenue for services that can be easily scaled to address demand – without capital investments.
- Personalization and customer engagement through analysis of customer behavior and interests (ie leverage of ‘big data’).
- Market driven development through testing, prototyping and user behavior analysis.
- Alignment of fundraising, revenue model, product IP, team and global financial structure to maximize valuation.
Next Step maximizes global growth through commercialization and transformation of our clients’ revenue and profitability delivering up to 200% increase in market valuation.
Please plan to join us and White-Summers in San Francisco on 17 March at Founders Space for “How to Build a Global Unicorn” conference.
Register, give us a call on 650 361 1902 or schedule a time to discuss how unicorn success drivers can improve your business.
Successfully Hiring Sales Leader by Next Step | posted: 01/13/2016
The most impactful company mistake occurs when hiring a sales leader. While selecting the best talent for all roles is challenging; identifying and on boarding a sales leader position is more fraught with error because:
- Most executives or entrepreneurs who are responsible for hiring a sales leader do not have a sales background. Without knowing the challenges, needs, skills needed for success in a role it is difficult to judge one candidate versus another.
- Different types of services, products and companies require specific sales approaches. Many times a sales person or manager is good at one type of sales but his / her skills and style may not be a match for the type of sales required by another company.
- A hungry sales person seeking his / her next job may be good at selling themselves – but this does not mean they really the right sales person or manager for your company.
- Specific expectations for the first months’ sales results are not agreed upon and/ or the sales compensation does not align with company goals.
These issues can have a significant impact on company executives and investors as illustrated by the real world case of Teckno.
Avoid the impact of these mistakes through:
- Deep knowledge of the sales process and the skills, experience and style required to successfully drive sales for your company.
- A multi-faceted candidate assessment process that leads to joint understanding of requirements, expectations and fit of the selected candidate’s skills and style with the company.
- Compensation, on boarding and support aligned with company and candidate’s expectations.
Learn more about Hiring a Sales Leader.
Take the Next Step to Avoid Hiring Mistakes
Call Next Step on (650) 361-1902 for a complementary consultation before you embark hiring a sales leader to your business.
Now is the Time to Take out the Buts – Learning from Silicon Valley by Next Step | posted: 12/02/2015
Innovators in Silicon Valley and other areas known for entrepreneurship such as Israel, bring a strong passion, willingness to take a risk and strong commitment to execution. This ‘hunger to succeed’ – professionally and personally can be driven by need, competition or sheer personal desire to make a difference.
Comparatively in Norway, the culture has not historically embraced risk taking and ‘thinking outside the box’. Common phrases from Norwegian ‘would be entrepreneurs’ are “I would like to do something on my own but….if I fail….” Or “I have an idea but .. need funding… “ or “It would be great to commercialize this solution … but I don’t have resources’.
Now, ‘post oil’, bringing rising Norwegian unemployment rates and economic impact, is the time for innovators in companies and on their own to ‘Take out the Buts’. By focusing on the passion and opportunities ahead for your innovation, you can take the Silicon Valley approach to action and execution.
In Silicon Valley when an idea comes to an entrepreneur, the first question is what can I do to build it and get customer / market support . The focus is on the opportunity – not the obstacles or reasons not to move forward ie the ‘buts’ . The passion to bring a new idea into the world overshadows the fear of potentially negative consequences.
Whats the worst that can happen?
Consider this – If you start out on your own… “what is the worst thing that can happen?”. If you are healthy and have some financial savings or foundation, the very worst outcome would be that you spend a few months or year learning what does and doesn’t work. You can then choose to return to the corporate world or start out on your next new venture.
The risk of missing an opportunity to make a difference by bringing your great idea / product into the market can be a lot worse than the ‘simply’ missing out of a year or two of a comfortable corporate lifestyle even in Norway.
In Silicon Valley – the only ‘but’ is ‘why didn’t I do this sooner’. Risk leads to reward – through success or learning (from failure). By taking action, removing the ‘but’ and moving forward, entrepreneurs worldwide avoid the ‘worst that can happen’ – regret from not having made a difference through great innovations.
Provided by Jennifer Vessels, 3in Silicon Valley Correspondent and Next Step CEO – www.nextstepgrowth.com for more info
Attracting and Recruiting Success Team in Hot Economy by Next Step | posted: 11/11/2015
Great companies are built from talented people working together for a common goal. In a strong economy with VC funded startups providing high levels of compensation and perks, competition for these great people can be fierce. However it is possible using tips below (from recent Silicon Valley panel):
Lead in the Purpose Economy:
Top talent, especially the younger ‘millennial’ generation want to work with and for companies that have a real purpose and positively impacts people, environment and society. This is through their mission, products or go to market approach – all team members share and live for a common purpose. To recruit top talent, start with defining the real purpose and value of your company – more than making money.
Get to know Ideal Target Employees:
Long before you need to fill a job or role, define and validate the required experience, skills and aptitudes of the ideal person to succeed in the role. Use social media and your network to begin a ‘get to know you’ dialogue with people that fit those characteristics. Through this, gain greater awareness of their needs and interests, adjusting the value proposition accordingly while building a pipeline of candidates.
Communicate with Top Talent on Their Terms:
Confucius’ words, “Fish in the pond that the fish love – not where you like to hang out” applies to the art of talent recruitment. When you are seeking candidates, look at the social media channels, organizations, meetups / hangouts in which your target audience participates. On those networks or channels, post compelling information, news testimonials of current employees’ happiness to build awareness with future candidates.
Communications with candidates should then be using he media they prefer ie text or chat for younger generation workers versus email.
Build a Success Team Culture and Reputation
Recruitment of today’s top talent is the beginning of the journey – leading to a strong team of highly engaged employees which then attract and refer future employees. Top companies of all sizes in Silicon Valley and globally are recognized as providing employees with a purpose they believe in, a supportive, team environment, benefits that show leadership understands employees needed and a management team that demonstrates the company’s values on a daily basis.
By Jennifer Vessels CEO, Next Step (www.nextstepgrowth.com) a global consulting firm based in Silicon Valley, providing top talent, sales and market approaches.