Janet Kraus
Jan., 2006

While thousands of new businesses are started each year that are full of potential, only a small minority of start-ups blossom into a larger company that reaps results.

In fact, the U.S. Small Business Administration reports that the majority of start-ups fail in their first year and 95 out of 100 fail within their first five years. What's eye-opening is that the vast majority of these small businesses fail not because of poor ideas or an unwillingness to work hard --- but rather because the business leaders fail to structure the business around core principles.

Since we launched Circles in 1997, we have raised over $26M including two institutional rounds in January of 2000 and May of 2001, reached profitability in Q4 2001, and have maintained profitability since. We attribute our success to the fact that we consciously followed 5 basic business principles from the onset. While these principles are not proprietary, they are often overlooked:

1. Ask the customer and then listen as hard for what they are saying ---- and even harder for what they aren't saying
2. Network like crazy
   
3. Hire, educate, support and mentor great people (not good people, great people) - then get out of their way
   
4. Stay true to your core and embrace change
   
5. Be accountable to someone other than you

Ask the customer what they want often and then listen hard to what they are saying --- and even harder for what they aren't saying. While it is critical for early stage entrepreneurs to be passionate about their product/service --- and it's this passion that will fuel the company --- it is important to look at the product/service from the perspective of the customer, not only from the beginning but throughout its lifecycle.

• How does the customer want to access it?
• How does the customer want it to be delivered?
• How much does the customer want to pay for it?
• How does the customer like the service now that you have tried it?
• What would the customer like better going forward?

By seeking answers to these questions, when it comes time to share your product or service, you will be better able to tailor your description to directly meet the customers' explicit needs.

Network like crazy. Networking is fundamental to everything that pushes a company forward. It is the basis of sales, fundraising, recruiting great people, and generating PR and visibility. Networking is not about getting to know people with the purpose of getting something for yourself. It is about bringing in as many people into your interconnected circle of understanding as you can so that you can learn, give, exchange, expand, connect and yes, sometime receive.

Hire, educate, support and mentor great people (not just good people, great people) --- and then get out of their way. It is not all that hard to hire people; it is not even hard to hire good people. It is really hard, however, to hire great people who are a great fit for your company. In the early stages of a business (and truly even at the middle or later stages), every person is a reflection of the business and every person should add to the company exponentially. This is why it is critical that employees understand continuously what great means (versus good) in their role. And then they need tools and resources to help them be great --- internal mentors and coaches, ongoing support and encouragement, open and honest communication, and constructive and timely feedback.

Stay true to your core while embracing change. As an entrepreneur, there are so many unknowns and so much that is ambiguous --- so many paths that are not completely clear until you are half way down them. How do you make decisions in the face of all of this uncertainly? By staying true to the core while embracing change. And in order to do this . . .you need to know what is core.

Things that are core always start with values - what are the behaviors and the lines in the sand that I am not willing to cross to make this venture successful? What are those things that I hold so dear that changing them would compromise who the company is and how people understand the company? When you know what is core, it makes it easier to know what you can change as you try to go by brail through the darkness of ambiguity. And once you write it down, then you can trust others to preserve the core while make decisions that increase the probability of success without you having to be part of every decision.

Be accountable to someone other than yourself. One of the hardest parts of about leading your own company is that the buck stops with you. At the end of everyday day, you are responsible for the success or failure of your venture. While it's a lot of responsibility, it can also be very isolating. To whom do you turn for advice? Who serves as a sounding board for the questions that you have? Who holds you accountable to the goals you set? Who tells you are making good decisions? A Board of Directors.

A good Board of Directors with whom you meet on a regular basis - generally quarterly or every other month - should:

1. Know your goals and provide you with advice, coaching and motivation to reach them
2. Serve as a sounding board for choices you have to make
3. Provide you with a routine that you must prepare for, show up for and be ready to explain any progress you have not made
   
4. Hold you accountable to the goals that you set for yourself

While a great idea and passion form the foundation of a successful venture ---- building upon this foundation requires adhering to basic business principles. Are these five principles sexy? Cutting-edge? Proprietary? Of course not. But, they are the building blocks upon which scores of successful enterprises are built.

Janet Kraus is CEO and co-founder of Circles (www.circles.com; 617-622-6200) , a loyalty marketing company that delivers concierge services, events and unique experiences provided as customer rewards and employee benefits for some of the world's leading brands.