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3 Strategies to Convince People That Your Startup Is Legit

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The approach of three new Chinese EV automakers demonstrates the value of legitimacy for venture building; these firms were able to reach volume production just two to four years after they were founded, compared to Tesla, who took 9 years. They raised nearly $7 billion in venture funding and all three were recently listed in the U.S. How did they do it? By implementing three actionable strategies to manage legitimacy to access the resources they need: leveraging existing sources of legitimacy, aligning actions with resource holders’ expectations, and redefining perceptions or assumptions held by resource holders.

To start and grow their firms, entrepreneurs need a lot of things from other people. They need funding from investors, skills and commitment from a founding team, approvals from regulators, collaboration from suppliers, and attention and demand from customers, among other things. But to unlock these, entrepreneurs must establish their legitimacy in the eyes of each of those resource-holders, or “audiences.” They have to show that they’re trustworthy, that they have a good product, and that they can take it to market. This effort is particularly challenging because each of these different audiences has its own criteria for what makes a venture legitimate.

In our research on legitimacy strategies, we looked at China’s high-growth and intensely competitive electric vehicle (EV) market (which also happens to be the world’s largest), where, a new group of entrants is challenging incumbent automakers, including Tesla. Three outsiders in particular — NIO, XPeng, and Li Auto — seem poised to emerge as local champions. All three were typical startups faced with significant liabilities of newness and lacking key resources. But these three firms were able to reach volume production just two to four years after they were founded, compared to Tesla, who took nine years. They raised nearly $7 billion in venture funding and all three were recently listed in the U.S. And while all three had connections to the auto industry, EV design and manufacturing was an entirely new venture for them.

How did they accomplish this? We found that successful entrepreneurs — new entrants in particular — implement three strategies to build legitimacy and access the resources they need: leverage existing sources of legitimacy, align actions with resource holders’ expectations, and define (or redefine) perceptions or assumptions held by resource holders.

Here’s how these strategies work.

Leveraging existing sources of legitimacy.

The first step taken by the founders of all three firms was to leverage their personal resources as a source of legitimacy to attract critical resources, including a core founding team and sufficient startup funding. Founder William Li of NIO leveraged the personal networks he had formed while building BitAuto, an internet portal for auto news, listings, transactions, and social communities for car buyers and drivers. Xiang Li, of Li Auto, leveraged relationships formed while building AutoHome, a similar site. Li also brought AutoHome’s existing top management team on board, further increasing investors’ confidence in the new firm. While the founders of NIO and Li Auto brought money and people to the table to build legitimacy, the original founders of XPeng brought experience; both had worked as lead researchers in EV control systems and autonomous driving in the state-owned manufacturer Guangzhou Auto Corporation (GAC). They leveraged that to attract Xiaopeng He, initially as an angel investor and then as co-founder and CEO. He leveraged his leadership experience, cash, and professional connections to Alibaba, which had acquired his previous internet browser company, to build the new company’s resources and access.

Aligning with requirements, norms and expectations.

In some cases, to project legitimacy and gain access to critical resources entrepreneurs must align their actions with the “rules of the game,” including formal regulations and informal but strong norms. For example, even if the leadership team has impressive credentials, investors typically expect them to have substantial “skin in the game.” The leaders of these three ventures aligned themselves with this expectation, each of them personally investing over $100 million in their ventures. Each firm also needed a license to manufacture automobiles. To meet that regulatory requirement and enter the market sooner, NIO and XPeng initially outsourced production to an existing auto manufacturer, while Li Auto acquired a manufacturer with the necessary license.

Redefining perceptions and assumptions.

Finally, all three founders have created a new paradigm for what an EV can be, and which differentiates them from other competitors, including Tesla. They have gone beyond Tesla’s vision of a “smart” EV — based on the operating systems, over-the-air software updates and driver assistance functions — to include platform-based connectivity among customers and online service providers. While Tesla’s smartphone app is integrated with the car’s navigation and functions, those of NIO, XPeng, and Li Auto are also a platform for their users to form friendships and share reviews, photos, experiences and news of upcoming events. NIO, for example, has over 200 thousand daily active users, and 50% of new customers are referred by existing customers. These online relationships are supported by each firm’s network of offline direct-sales and experience stores that are very different from typical 4S dealerships.

Entrepreneurs often ignore the importance of managing the perception of legitimacy when they build a new firm, enter a new industry, or launch a new product. Without legitimacy, entrepreneurs have to enter meetings with cold, unfriendly investors for funding or regulators for approvals, waste many dollars and efforts to acquire users, and struggle with opportunistic co-founders or mediocre suppliers. Such efforts are unlikely to be effective nor efficient. Entrepreneurs without legitimacy with key audiences may keep bootstrapping for years, and only a small number of lucky ones will be able to finally take off.

The approach of these three new Chinese EV makers demonstrates not only the value of legitimacy for venture building, but also all three effective legitimacy-gaining strategies: leveraging existing sources of legitimacy, aligning actions with expectations and requirements, and redefining perceptions of what is “normal” and legitimate. These examples show that entrepreneurs should see legitimacy-building as a key part of the venture-building process, essential to increasing the effectiveness of their resource-seeking and growth acceleration.

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10 Software Tools to Keep Your New Business Documentation Organized

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When it comes to documenting SOPs, training materials and other important internal business processes, what’s one tool or software (not your own) that you would recommend new business owners use, and why?

These answers are provided by Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most successful young entrepreneurs. YEC members represent nearly every industry, generate billions of dollars in revenue each year, and have created tens of thousands of jobs. Learn more at yec.co.

1. Google Docs

Stay simple and use Google Docs. With direct edits and commenting features, it’s easier than ever to constantly improve upon your living documents. That way, your SOPs can continue to evolve along with your business.

Firas Kittaneh, Amerisleep Mattress

2. Loom

You can use Loom, or a similar screen-recording software, to record short videos for your team and create sections within the platform to optimize your SOPs and onboard new hires. Video information is easier to retain for most and is also easier to look up again and parse out. Certain processes are timeless and can also be used if someone needs to take over a process in an emergency.

Matthew Capala, Alphametic

3. GitBook

Although Google Docs is an elegant and convenient resource, I think GitBook might be the next best thing. It’s far more functional than a simple Google Doc, since it allows you to structure your SOP more like a wiki page or a full website instead of a handful of files in a folder.

Bryce Welker, Testing.org

IT documentation

4. JobRouter

JobRouter is one tool that I love using for documentation purposes. It helps you manage your documents from creation, editing, approval, release and distribution. It also integrates beautifully with Microsoft Word for ease of use.

Thomas Griffin, OptinMonster

5. Process Street

When documenting SOPs, Process Street is a great option. It’s a user-friendly process management software that allows you to create, track and schedule workflows. It also lets you create checklists, collaborate with your team, capture data and more so you have full control over your processes.

Stephanie Wells, Formidable Forms

6. Trainual

Trainual is a software that helps business teams run internal processes faster, better and smoother. A pain businesses face is maintaining performance as teams are assembled, grow, mature and are refreshed. The onboarding process is one process that plays a significant role in growing and refreshing teams but, if botched, organizational performance suffers. Trainual focuses on that onboarding.

Samuel Thimothy, OneIMS

7. Trello

While I wouldn’t necessarily recommend it for distributing official materials, an excellent system for organizing, commenting on and discussing internal documents among multiple teams is Trello. Trello allows you to share, sort and comment on documents in an easy-to-manage system. With their team functions, you can also ensure only those who need the materials will have unrestricted access.

Salvador Ordorica, The Spanish Group LLC

IT project management

8. systemHUB

One tool that I love using for any documentation purpose is systemHUB. It lets you integrate your existing project management software and continue working on it. You can replicate the existing documents or start from scratch as per your requirement. You can also share it with your team and do a lot more.

Josh Kohlbach, Wholesale Suite

9. ETQ

The most important thing about document control software is retrieving what you need when you need it. I like ETQ because it streamlines the entire process from document creation through retrieval and training. ETQ lets you set up permissions for employees to access the information they need and automation to notify employees of upcoming/pending training.

Matthew Podolsky, Florida Law Advisers, P.A.

10. Your Own Internal Wiki

Create your own internal wiki. There are many plug-and-play WordPress templates that are easy to use and pre-built to act as an internal wiki. Allocate a login to each employee, categorize content and use hashtags to make your SOPs and other processes easily searchable.

Chase Williams, Market My Market

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How Startup Studios are Bringing New Ideas to the Startup Space

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By Startup Studio Insider

Even as businesses have struggled through COVID-19, investors have been eagerly bringing capital to startups with the hope that new and fresh businesses will catch on and become the latest and greatest success. This influx of capital is primarily due to the exponential growth of new investment models that have exploded into the mainstream in the last five years. It is these new funding models that are helping connect entrepreneurs with investors who fit their wants and needs.

This new phenomenon of the ‘perfectly matching’ entrepreneur is a beautiful symbiosis capable of helping startups avoid risk, increase efficiency, and continue business development in a forward trend.

In this explosion of entrepreneur-startup matching, startup studios have developed almost a cult following. As many entrepreneurs have strong ideas, but lack the experience, finances, or team to bring them to fruition, studios provide a sort of safety net, capable of helping entrepreneurs deal with business and operational aspects, leaving them the time necessary to focus on ideas. With this initial investment, the special teams behind startup studios are mobilizing to mitigate risk for new businesses and help entrepreneurs focus on what matters most.

Startup studios are a critical competent of the startup and entrepreneurial space due to their capabilities to usher new ideas and practices into the industry. As this model continues to change the startup space as we know it, take a look at the list below to learn more about how a startup studio can single-handedly turn any entrepreneurial project into a juggernaut.

A Concrete and Singular Vision

Startup studios are built to do one thing and one thing well: build companies from the ground up. As this is the core initiative of these studios, they are better equipped than any other organization to take an entrepreneur from initial idea stages all the way to launch and beyond.

Because of this singular focus, startup studios are in the business of churning out these business over and over again. What this means is that they have not only repeated the process many times, but also standardized it down to a science. They’ve experienced every step of the process, and can often forewarn against roadblocks or concerns inexperienced entrepreneurs would plow headlong into.

Complete Operational Guidance

With the repetition behind the core of startup studios, they have a layer of shared resources which allow for a more rapid development and faster growth process than many other incubators or accelerators. From strategy playbooks to cross-collaborative teams, processes, and backing, these resources have allowed companies to take their development to the next levels.

Additionally, startup studios are invested in the process of developing a product beyond its launch. As such, many studios have developed programs to share resources and guidance beyond the launches from the startup studio and into the spaces beyond them.

Startup team doing planning

Oversight on Strategy

As startup studios are deeply entrenched in the day-to-day operations of their projects from the very start, especially when compared to incubators and venture capital firms, they are more capable of providing strategic oversight than other investment styles.

By utilizing a repeated process, as well as the experience of the entire team, these studios are capable of developing plans from the start, and imparting wisdom and experience onto younger entrepreneurs. This strategic guidance has been cited by many who’ve gone through the startup studio ecosystem as one of the most essential tools they’ve taken away from their experiences.

While the startup studio model is not for everyone, it is a true partnership that provides more than just financial backing. A studio is a great model for entrepreneurs who thrive off of teamwork and collaboration, and who may be looking to deepen their experience and learnings. While they can require flexibility and trust in their studio’s guidance, they are often a critical tool in pushing startups to the next level.

As the old adage goes, if you want to go fast, go alone; if you want to go far, go together. If you want to truly take your idea to the next level, consider developing it under the help and guidance of a startup studio. For more on startup studios, be sure to check out Startup Studio Insider, the newest journal providing daily insights into the startup studio space.

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5 Mistakes Business Owners Make When They Open a New Dental Clinic

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Starting a dental clinic is a daunting task, especially for young, budding entrepreneurs. The medical equipment can be pricey, putting the owner at great financial risk. Because of that, planning is a crucial step of the process that can save you a lot of money and stress down the line. Luckily, even if you don’t have experience running a business, you can learn most of these things.

photo credit: Tima Miroshnichenko / Pexels

With that in mind, here are the five mistakes business owners make when they open a new dental clinic:

1. Hiring Too Quickly

Due to high expenditures, business owners tend to rush the initial processes when opening a clinic. Hiring the right staff is crucial for your success, but unfortunately, some entrepreneurs make a decision for all the wrong reasons.

As a way of cutting expenses, lots of owners will hire young professionals straight out of school. Sometimes, they will put them on probation even if they have experience. When the time comes to hire them as full-time employees, they might not have enough loyalty to stay with your organization.

Having enough experience is crucial for dentists, but you also need to consider if this person is the right fit. Business owners neglect long-term plans and team suitability for short-term financial goals. Hiring a reputable professional is usually a better idea as it will bring stability to your team.

2. Not Creating a Beautiful Website

Word-of-mouth marketing was always crucial for companies, and it is especially important for small businesses such as dentistry. Unfortunately, getting those first clients is always a choir.

Many owners neglect the power of promotion, thinking that it’s enough to have a good service. However, unless you’re able to attract those initial patients, you will never be able to scale the business.

Having a great website is important as it sets up the basis for search engine optimization. Down the line, it will help you reach more people through Google. But it also works as a digital business card. Like your clinic, the website needs to be clean and to instill confidence in potential patients.

3. Ignoring Search Engine Optimization

Performing search engine optimization or SEO is a time-consuming job. However, small local companies can achieve great results in just a few months.

According to several professionals that conduct dental SEO by Dental Marketing Guy, local search engine optimization is an ideal way of promoting dental services to your local community. When a person looks for medical experts in their home city, your clinic should appear at the top of Google search pages. By investing some money in this promotional activity, you can get thousands of new clients in a short time.

Among others, search engine optimization is great for branding. Unlike other digital marketing activities, such as pay-per-click, the SEO results will remain even when you stop paying for the service.

Dental assistant working on a laptop

4. Not Having a Stellar Customer Service Plan in Place

We can argue that customer service is more important for dental clinics than most other businesses. This is because lots of patients are anxious before treatments and exams. Like with any other medical procedure, a person wants to be certain they’re in good hands.

Most patients are willing to pay extra for premium dental services. However, if you have poor customer service, it can dissuade them from giving you a chance. Even if they visit your clinic once, they might not return.

Retaining a patient is especially important in dentistry. Like with some other services, a patient is willing to travel long distances to perform an exam at the same clinic. Once a person chooses a dentist, they will likely return to the same person for most of their lives. And the lifetime value of one patient can be high.

5. Not preparing for the unexpected

Similar to other businesses, dental practices are subject to inherent business risks. For example, an equipment malfunction can set you back for months. In some situations, it might take weeks before you can get back to business. Losing a staff member can also be a major problem.

Although you cannot avert some potential issues, you need to have a contingency plan. First off, a business owner needs to have a healthy cash flow to cover any unexpected expenditures. Having debt is normal for dental offices, but you need to reduce liabilities as soon as possible.

One way to protect yourself is by getting insurance. Certain policies can cover dental practice overhead and provide you with income when you go on a hiatus.

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