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How to Create Effective Recognition Programs for Startup Founders

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How to Create Effective Recognition Programs for Startup Founders

Opinions expressed by Entrepreneur contributors are their own.

In the bustling world of startups, the concept of “sweat equity” often buzzes in the background, unrecognized yet vital. Founders pour their time, expertise and relentless energy into building their ventures from the ground up. While financial investments are typically acknowledged and rewarded, the non-financial contributions — or sweat equity — of these entrepreneurs are just as crucial for success but often go unnoticed.

The recent surge in tech layoffs and its impact on the startup ecosystem is a testament to sweat equity. In 2024, the tech industry has experienced a significant wave of layoffs, with 60,000 job cuts across 254 companies, including major players like Tesla, Amazon and Google. This development highlights the precarious nature of tech and startup employment, underscoring the importance of acknowledging and valuing the non-financial investments that founders make in their startups.

Additionally, Microsoft’s recent initiatives, such as the Startups Founders Hub, demonstrate a growing recognition of the challenges founders face and the support they require. This program provides up to $150,000 in Azure credits to help founders develop their startups without heavy initial investments, emphasizing the value of supporting the non-financial contributions that drive innovation.

Related: How Startups Can Boost Team Morale and Drive Success Through Recognition

Understanding (and recognizing) sweat equity

Sweat equity is not just about the number of hours logged; it encompasses all the non-financial investments founders make in their startups. This includes the late nights, the strategic decisions made in the wee hours of the morning, the continuous learning and adapting, and the personal sacrifices. According to a study by the Kauffman Foundation, over 80% of startups are bootstrapped, which means founders are both chief executives and chief investors of their time and skills.

Recognizing the immense value of sweat equity is a strategic move. A survey conducted by Gallup and Workhuman found that companies with high employee recognition levels are 20 times more likely to be engaged as employees who receive poor recognition. When founders feel valued for their non-financial contributions, it boosts their morale and loyalty, directly influencing their enthusiasm and commitment to the venture. Recognizing these efforts fosters an environment where the intrinsic rewards of entrepreneurship are celebrated alongside the financial gains.

Creating a recognition program for founders should not be a one-size-fits-all approach. It should be as unique as the startup itself, reflecting its culture and growth stage. For instance, a tech company might recognize breakthrough innovations with annual corporate awards, while a social enterprise might highlight efforts toward social impact. Buffer, a social media management tool well-known for its transparency, extends this value into recognizing its founders by openly sharing the challenges and successes in their monthly blogs, which not only recognizes the founders’ efforts but also engages the community in their journey.

Related: From Launch to Succession: Tips for Building a Thriving Business

How to pump up your recognition efforts

By integrating a few detailed action steps and leveraging insights from successful companies, you can create a robust recognition program that acknowledges the hard work of founders while driving your startup toward greater success and cohesion. Consider the following:

1. Assess current recognition practices:

Before crafting a new recognition program, conduct a thorough assessment of existing practices within your startup. According to a Gallup study, only one in three workers in the U.S. strongly agree that they received recognition or praise for doing good work in the past seven days. This highlights a significant gap in recognition at many organizations. Start by surveying founders and key stakeholders to understand what is currently working and what isn’t. This initial feedback will serve as a baseline for developing a more impactful recognition strategy.

2. Develop personalized programs aligned with values:

Personalization is key in recognition programs. A study by Deloitte found that organizations with high-performing recognition practices are 12 times more likely to have strong business outcomes. Take inspiration from companies like Zappos, which tailors recognition strategies to match its corporate values and unique culture. For instance, Zappos offers “Co-Worker Bonus Programs” where employees can award each other monetary bonuses for going above and beyond. Aligning the program with your startup’s values ensures it resonates well with the founders and reinforces the behaviors that are critical to your startup’s success.

3. Foster peer recognition and celebrate achievements:

Peer recognition can significantly enhance workplace morale and productivity. A report from SHRM/Globoforce found that peer-to-peer recognition is 35.7% more likely to have a positive impact on financial results than manager-only recognition. Encourage a culture where founders and team members frequently acknowledge each other’s efforts. This can be facilitated through platforms like Bonusly, where employees can give each other micro-bonuses that add up to meaningful rewards. Celebrating achievements, big and small, ensures ongoing motivation and engagement.

4. Continuously evaluate and adapt recognition efforts:

Effective recognition programs require ongoing evaluation to stay relevant and impactful. Regularly gather feedback through surveys, focus groups and one-on-one interviews to understand the effectiveness of your recognition efforts. Companies like Salesforce exemplify this approach through their “V2MOM” (Vision, Values, Methods, Obstacles, and Measures) process, which involves continuous feedback and goal alignment across the company. This method ensures that all team members, including founders, are aligned and can contribute to the evolution of recognition efforts. By maintaining a dynamic feedback loop, you can make data-driven adjustments to the program, ensuring it evolves with your startup’s needs and continues to motivate and inspire your team.

Related: The Psychological Impact of Recognition on Employee Motivation and Engagement — 3 Key Insights for Leaders

By using such a dynamic and inclusive approach, startups can ensure their recognition programs remain effective and responsive to the needs of their founders and team members.

Developing a founders’ recognition program is about nurturing a culture that values each drop of sweat that goes into a startup. Such a culture accelerates growth and cements a foundation of loyalty and mutual respect that can endure the challenges typical of the startup world. As startups continue to evolve, the recognition of every contribution, financial or otherwise, will remain a cornerstone of sustainable success.

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The 7-Step ChatGPT Formula for Peak Productivity and Profit

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The 7-Step ChatGPT Formula for Peak Productivity and Profit

Tackle AI’s toughest questions with Ben Angel, mapping the business terrain for 20 years. Master the AI landscape and reach peak productivity and profits with insights from his latest work, “The Wolf is at The Door — How to Survive and Thrive in an AI-Driven World.” Click here to download your ‘Free AI Success Kit‘ and get your free chapter from his latest book today.

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How I Hit $100 Million in Annual Revenue By Being More Transparent

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How I Hit $100 Million in Annual Revenue By Being More Transparent

Opinions expressed by Entrepreneur contributors are their own.

It’s a common nightmare — you’re walking through a busy hallway or giving a presentation only to look down and find yourself completely naked.

We’re inherently fearful of revealing too much about ourselves, and as an entrepreneur, this likely extends to your business as well.

But based on growing my own business from nothing to over $100 million in annual revenue, I can tell you less is not more when it comes to business transparency — more is more. Being open builds trust, and trust fosters customers and relationships in droves. The only exception is not giving away your trade secrets to competitors.

Here are three effective ways to build trust with clients and prospects by being more transparent (without leaving you feeling nightmarishly over-exposed).

Related: How Transparency In Business Leads to Customer Growth and Loyalty

1. Increase sales by 18% or more by increasing your Google reviews

Nearly everyone reads reviews before purchasing. One study found a whopping 93% of people read reviews before making a purchase, and on average, reviews produce an 18% uplift in sales. In today’s online landscape, people put almost as much weight on a Google review as they do on a personal recommendation.

The best way to increase your reviews is to simply ask! According to research, 70% of consumers will leave a review for a business when asked.

About four years ago, we had 486 reviews after servicing more than 90,000 clients. We started using Podium to send out texts or emails — based on customer preference — asking to leave a review on Google, the Better Business Bureau and Trustpilot.

By May 2024, we’d accumulated 2,312 five-star reviews, an increase of 375%. Keep in mind that our account managers have been very diligent about sending review requests to clients and only ask the clients most likely to give positive responses.

Another good way to increase reviews is to automate postcards at the close of an order thanking someone for their business and encouraging them to leave a review. A physical mailer is likely more effective than an email — one study that surveyed 1,200 consumers found that 76% trusted direct mail the most as opposed to online methods.

You might be wondering, “What about the negative reviews?” You’re always going to have a handful of bad reviews, but people look at the ratio of good vs. bad. If you have far more five-star reviews than one-star reviews, they’ll disregard the negative ones and assume it’s not the norm.

2. Improve lead generation by 105% by sharing your clients’ success stories

Sharing real marketing results has always been a priority for my business, PostcardMania. We currently have 944 marketing case studies and 139 video case studies that document real people sharing campaign specifics that led to more leads, revenue and new customers for their businesses.

We share these case studies far and wide with prospects via email and postcards in the mail to increase trust. But more recently, we began incorporating these stories into video social media ads. During a recent earnings call by Meta, CEO Mark Zuckerberg said 50% of all people’s time on Facebook and Instagram is spent watching videos, so naturally, we went that direction to gain more eyes on our services.

We put our 139 video case studies — real business owners talking about their successful campaigns — to work for us on Facebook and Instagram.

As a result, our social media leads doubled. In 2022, our average number of social media leads per week was 174, and then in 2023, the average lead count increased to 356 a week! That’s a 105% increase.

Of course, our use of social media in this case is part of a larger multi-channel marketing strategy that ties direct mail and digital ads together, so I suggest a similar approach if you want to see the same results (we’ve actually packaged our successful approach into a single affordable marketing bundle called Everywhere Small Business due to high demand from our clients to replicate this method). Campaigns that uniquely combine print and digital advertising using hyper-targeted mailing lists and lookalike audiences have been proven to work time and time again, so I highly recommend them.

It doesn’t matter what industry you are in, your customers’ success stories can be compiled and incorporated into your marketing plan to grow your customer base.

Related: How Problem-Solving Case Studies Help You Market Your Business

3. Convert prospects faster by dropping the velvet rope and inviting them in

Being transparent online will help build a positive image of your brand and bring in more customers — but you can also take this one step further and let prospects visit your business and interact with your products or services in person. One report revealed that 79% of customers want brands to go above and beyond what they are required to reveal and give more information, with two-thirds of them saying they would switch brands for more in-depth data.

At PostcardMania, we welcome clients to visit us and take a tour of our in-house printing facility. We also have a marketing conference twice a year where clients can meet their marketing consultants face-to-face and learn more about our business behind the scenes. These clients often end up being some of our best and longest-lasting relationships! You can do the same by hosting an event and opening your doors to the public. It doesn’t have to be a conference — you can start small with something as simple as a night of snacks and entertainment.

Related: 3 Ways to Personalize Your Marketing for Higher Engagement

Free samples are also a great way to show customers exactly what they are getting before they make a commitment. This doesn’t always apply to every business, but you can try to find a way to allow prospects to interact with your product or service on a deeper, more physical level.

Incorporate any of these tactics, and you’ll show prospects the most authentic side of you and your business. Believe me when I say trading in your fears about being super transparent for bold authenticity will reap real rewards in long-term growth and customer loyalty.

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The 10 Best and Worst States to Start a Small Business

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The 10 Best and Worst States to Start a Small Business

There are many important things to consider when launching your own business or side hustle, and location is at the top of the list. Local and state laws can mean different taxes, zoning regulations and licensing requirements, so it pays to be strategic about your choice of state, city and even neighborhood, according to the U.S. Small Business Administration.

Related: 5 Things Not to Do When You’re Running a Small Business

After all, some 20% of new businesses fail within the first two years of being open, according to the U.S. Bureau of Labor Statistics (BLS). The BLS also found that 45% of businesses fail within the first five years. That number jumps to 65% after 10 years.

Capital on Tap, a company that offers a credit card and spending management platform for small business owners, analyzed BLS data to determine the percentage of startups that are still active after three years — and broke down the U.S. states with the highest and lowest chance of survival in three- and five-year time frames.

“There are over 30 million small businesses in the U.S., making up an enormous percentage of the economy, and as this number continues to grow, so will innovation and commercial drive,” says Damian Brychcy, chief executive officer at Capital on Tap. “This research should serve as a positive sign to entrepreneurs in the top ten states who are thinking about starting a business.”

Image Credit: John Coletti | Getty Images. Boston, Massachusetts.

Qualities of business-friendly states

Before diving into the data, it’s important to consider what factors make a state attractive for new business owners. And it’s about more than just starting a business. The following factors can help keep small companies afloat and lead to ongoing success:

Taxes

Perhaps the most important factor of all, a business-friendly tax environment can keep costs down and put more money in your pockets. There are payroll, employment, income and corporate taxes to worry about, all of which can affect decisions around hiring and expansion. Some states also offer tax incentives for small businesses, which can remove expensive hurdles. Reviewing a self-employed tax schedule in your area can help.

Workforce

If you want to run a healthy, growing business, you’ll almost certainly be hiring employees. The best states for small businesses will have a plethora of available talent and a workforce with high levels of college education. Starting a business near a college or university can also attract interest from recent graduates. This is especially prominent in the technology industry.

Regulations

State policies regarding small businesses involve more than just taxes and deductions. Government programs can offer business owners grants and loans and incentivize investment from larger funders. Compliance is another factor. States can lower the costs of business by removing regulatory red tape, such as required government approvals or clearances.

Growth potential

You want to start your business somewhere it can thrive in both the short- and long-term. A number of factors can support this — for example, funding, investment in infrastructure and livability. A close proximity to sources of financing can help your company grow, as long as the area can support your workers and their families. States and cities with a low cost of living, good schools and solid infrastructure will not only attract talent but keep it.

U.S. states/territories with the highest rate of small business survival, per Capital on Tap 

State

1year average (%)

3year average (%)

5year average (%)

Massachusetts

81.91

64.96

54.38

Wisconsin

81.13

64.93

54.97

South Dakota

80.44

64.03

54.88

Minnesota

80.96

63.97

53.51

Iowa

80.85

63.71

53.65

North Dakota

79.55

63.63

53.98

Pennsylvania

80.69

63.51

53.18

Montana

79.60

62.79

53.03

Hawaii

79.37

62.22

52.21

North Carolina

79.85

61.91

51.25

Massachusetts

With elite universities, a thriving tech hub, a strong economy and a highly educated workforce, Massachusetts tops the list. Nearly 82% of small businesses survive their first year. Boston is also a growing hub for STEM jobs and is home to many investors and potential employees. The state also boasts a strong Economic Development Incentive Program (EDIP) that provides tax and property incentives for job creators.

Wisconsin

Not only does Wisconsin have a relatively low cost of living, but the state has one of the nation’s best public university systems (read: highly educated workforce) and a business-friendly government that offers tax credits, low-interest loans and grants to small companies. Wisconsin also runs a public-private capital initiative through the Wisconsin Economic Development Corporation (WEDC), which recently announced a $100 million investment in the state’s startups.

South Dakota

Taxes are the big selling point for starting a business in South Dakota. With no corporate income, personal income, property or business inventory taxes, the state makes running a small company affordable for owners. The state is highly affordable and has very few regulations, both of which lower overall business costs.

Minnesota

Almost 81% of small businesses survive their first year in Minnesota, a feat that can be credited to the state’s supportive business environment, educated workforce and relative affordability for a high quality of life. Minnesota also has nine small business development centers throughout the state, which offer consulting, mentoring, networking opportunities and access to capital.

Iowa

With a high quality of life and low cost of living, Iowa is an attractive place to start and expand a small company. One of the biggest factors is extremely low energy and utility costs, which is especially important for manufacturing. Iowa cities also offer property tax incentives for small businesses and some of the nation’s lowest workers’ compensation costs.

U.S. states/territories with the lowest rate of small business survival, per Capital on Tap 

State

1year average (%)

3year average (%)

5year average (%)

Washington

75.12

54.60

42.75

District of Columbia

76.04

54.73

43.73

New Mexico

76.64

56.58

45.58

Florida

77.00

56.82

44.95

Nevada

77.18

57.38

46.79

New Hampshire

76.65

57.52

46.63

Arizona

77.34

58.00

46.74

Tennessee

78.46

58.21

46.81

Arkansas

77.64

58.24

47.25

Rhode Island

76.76

58.30

47.75

Washington

Less than 43% of new businesses in Washington are still running after five years, thanks to expensive real estate, complex regulations and the nation’s highest statewide minimum wage ($16.28/hour). The state’s business and occupation tax is also calculated based on gross receipts, not overall profits, so businesses with slim margins will especially struggle.

District of Columbia

Washington, D.C., is one of the most expensive metro areas in the country, both in terms of real estate and overall cost of living. That means high salaries and high rents for offices or storefronts. The city’s business income tax and regulatory requirements are also relatively high, both of which can cut into profit margins.

New Mexico

High unemployment rates and limited access to capital make New Mexico a challenging state to open a small business. Skilled workers are lacking compared to surrounding states, and complex regulations can be a burden for business owners. More than 23% of small businesses fail within their first year.

Florida

Although Florida claims to be a thriving hub for entrepreneurs and small businesses, the data tells a different story: More than 55% of small businesses fail within five years. One of the biggest factors is the increasing frequency and severity of hurricanes, which has led to rising insurance costs. This affects both the available workforce and a company’s bottom line as premiums skyrocket.

Nevada

Almost 23% of new businesses fail within their first year in Nevada, and that’s despite no corporate or individual income taxes. Part of the challenge is local governments: regulations vary widely depending on your city of choice, with different requirements for specific licenses and fees. A heavy reliance on tourism can also backfire when travel to the state falls off, such as during the pandemic.

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