It's Your Business: 183 Essential Tips that Will Transform Your Small Business
288
It's Your Business: 183 Essential Tips that Will Transform Your Small Business
288eBook
Available on Compatible NOOK devices, the free NOOK App and in My Digital Library.
Related collections and offers
Overview
With advice from Ramberg and such notable entrepreneurs as Blake Mycoskie and Guy Kawasaki, this right-to-the-point book covers topics from human resources to finance, public relations to sales, and much, much more -- all geared towards the small business owner.
Knowing that entrepreneurs have no time to waste, Ramberg presents simple and effective guidance that can be put to use right away. This book will be indispensable for every small business owner, from a family-owned store to a venture capitalist-backed start up.
Product Details
| ISBN-13: | 9781455508983 |
|---|---|
| Publisher: | Grand Central Publishing |
| Publication date: | 10/16/2012 |
| Sold by: | Hachette Digital, Inc. |
| Format: | eBook |
| Pages: | 288 |
| File size: | 1 MB |
About the Author
JJ Ramberg is the host of MSNBC's Your Business and the founder of GoodSearch.com, a Yahoo-powered search engine that donates to charity with each search. She is a graduate of Duke University and has her MBA from Stanford University.
Read an Excerpt
It's Your Business
183 Essential Tips that Will Transform Your Small BusinessBy JJ Ramberg
Business Plus
Copyright © 2012 JJ RambergAll right reserved.
ISBN: 9781455509003
CHAPTER ONE
FINDING YOUR FUNDING
Attracting investors, getting loans, and tapping other sources of capital
TIP #1
Four must-haves for your elevator pitch
On Your Business, nearly every week we have a segment called “The Elevator Pitch.” Some are highly polished and some are quite raw. So we asked Brian Halligan to give us some advice on how to make sure your pitch is a home run.
As a venture capitalist, Brian has listened to many elevator pitches. As an entrepreneur and the founder of HubSpot in Boston, pitching for money is second nature. The most successful pitches, he says, include what he calls PATS:
P—Show your Passion for your idea—don’t hide it.
A—Ask for a number—be specific: how much you want and how you will use it.
T—Show Traction—website visitors increasing, early orders, press coverage, etc.
S—Make Sense—rehearse it in front of the mirror and communicate your message clearly.
As small business owners, we often get so excited about our idea that we talk too long or give too much detail in an elevator pitch. So here is a simple worksheet for you to fill out:
Explanation: One line saying what your company does: _______________________________________
Traction: What statistics can you show to illustrate the upward success of your idea: ___________________
Size: How big can your company become: __________
Ask: What are you asking for: ____________________
Now take all of that information and put it into a paragraph and present it to someone who knows nothing about your business. Ask them if they now understand what you do, how successful you’ve been, and your potential for growth. Once you’ve got that down, stand in front of a mirror and practice, practice, practice so that you can deliver this pitch with passion and clarity. Remember, with a busy person, you’ve often only got one shot to impress them!
Added tip: David S. Rose, chairman of New York Angels, says you never know how much time someone is going to give you. So have an elevator pitch ready for every scenario: twenty seconds, one minute, five minutes, twenty minutes, and one hour.
TIP #2
Do’s and don’ts of meeting an investor
Don’t waste a good introduction with a poor follow-up. Too many people squander the opportunity to follow up with a potential investor once they’ve been introduced in a casual setting.
Mark Suster, a partner at GRP Partners, the largest venture-capital firm in Southern California, gave us this list of what to say and what not to say:
“Can you please check out my website and let me know your thoughts?”
“Here is my phone number, call me when you have time to talk.”
What NOT to say:
Investors are busy and are inundated with requests from people to “check out their company.” If you put the ball in their court, you’ll likely never hear from them.
“Would you mind if the next time I’m in town I e-mailed you to see if you had thirty minutes for a coffee?”
“I know that you’re very busy—would you mind if I asked for an intro to a junior member of your team to start a dialogue?”
“I know my company may not be in the industry you focus on—do you know any angels who might be interested in our space?”
What TO say:
Take things into your own hands. This way you control the next step and can ensure that it happens.
TIP #3
Sell your company—not the product—to investors
Customers and investors have very different interests in your business. People often come on “The Elevator Pitch” segment of Your Business and spend the entire time talking about how great their product is. While that might get them a new customer, it does not necessarily get them a new investor.
Howard Morgan, managing partner at First Round Capital in New York, says that this is a common mistake and easily fixed. He says that entrepreneurs need to remember that when they are pitching investors, they’re not pitching the product (as they would to a potential client or customer), they are pitching shares of the company. For example, when the company Public-Stuff (which provides outsourced 311 services to local governments) pitched their idea to Howard, the founders showed their product and it was, no doubt, intriguing. But Howard was more interested in learning how they would monetize the product and get the buy-in of their heavily politicized target customers.
Bottom line: It’s important to talk about what drives the share value. This of course includes the product benefits, but also other things, such as your team, the marketplace, and your marketing plan. You need to be focused not on why the product is so great but on why your company is so great.
TIP #4
Don’t choose investors based on valuation alone
It’s not just the amount of money you get but whom you get it from that makes the biggest difference. When you’re looking for funding, while it may be tempting to go with the investor who will give you the most money or the best deal in terms of valuation, New York–based Jason Goldberg, who has founded four tech companies including Fab.com (and sold two), says you shouldn’t give in to that temptation. He says, when you are deciding whom to take money from, you should, in addition to the valuation, consider the following:
Are your business goals truly aligned? Here are the questions to ask yourself and your investors to see if you are on the same page:
Do you want to grow quickly or build at a slow and steady pace?
Do you want to sell the company soon or build a large business with hundreds of employees?
Are you the person to run the company or should you bring in a CEO once you reach a certain scale?
Do you like working together and do you feel comfortable sharing your issues and getting advice from these people?
According to Jason, in the long run you’ll be much happier basing your decision on the answers to those questions than the valuation question. Remember, once you take money from someone, you’re in it with them for the long haul!
TIP #5
Don’t set a valuation during your friends-and-family round of funding
Problem: You’re raising a round of money from friends and family to get your company off the ground, but you don’t know how much of the company you should give away to them.
Solution: Don’t make that decision right now! David S. Rose, chairman of New York Angels and a serial entrepreneur, says that you can figure that out later. How? Give your friends and family convertible notes with a 20 percent discount on the next round. OK, OK… I realize that likely sounded completely confusing, so let me explain.
When your best friend gives you $5,000, don’t give her a percentage of the company. Instead, make it a loan that will be converted to equity if and when you raise your next round of funding. Then, when you raise the next round (presumably from more sophisticated investors), the company’s value will be set during the negotiation between you and this second round of investors. At that point, your best friend’s loan will turn into equity. But since she took the risk of betting on you from the start, she’ll get 20 percent more for her $5,000 than someone who put in $5,000 in this round.
Still confusing? Here’s a simplified worksheet to clarify things.
Round #1:
Mom: $10,000 convertible note
Brother: $5,000 convertible note
Best friend: $5,000 convertible note
Round #2: Company is worth $500,000 after the investment
New investor: $100,000—now owns 20 percent of equity
Mom: now owns 2.4 percent of company ($10,000 converted into equity plus 20 percent more)
Brother: now owns 1.2 percent of company ($5,000 converted into equity plus 20 percent more)
Best friend: now owns 1.2 percent of company ($5,000 converted into equity plus 20 percent more)
TIP #6
Borrow through peer-to-peer lending
Problem: You need a business loan, but your business is either too new or too risky for a conventional bank to put a large sum of money at your disposal.
Solution: Go online and check out peer-to-peer lending. Rather than a single entity putting up a large sum of money, you will be looking at a lot of people chipping in small sums that add up to the total of your loan request.
Here’s how it works: You list your loan request on a site like LendingClub.com or Prosper.com and then anyone on the site can see your request and decide if they want to lend you money. This could be your sister, your aunt, or, more likely, a complete stranger who likes what you’re planning to do and is looking to lend some money as an investment.
Case study: John Good, the owner of Bubbles Galore Car & Dog Wash in Davison, Michigan, had an idea a few years ago to add a self-serve dog wash to his car wash. He thought this combination would really set him apart from other car washes and that it would make his small business more of a destination than a dreaded chore. He did some market research, looked at trends in the pet industry, and decided it had a reasonable chance for success. All he needed was $16,000 to get it going.
He went back to his bank, which gave him the original mortgage on the car wash, but they refused even to consider a loan for this purpose. That’s when John went to “plan B.” He listed his business idea and his loan request with LendingClub.com. In less than two weeks, about two hundred people had pitched in to make up his $16,000. The money was instantly deposited in John’s account and the payments are automatically taken out every month. The term is three years.
Not every loan listed on peer-to-peer lending sites gets funded. John says he believes he got funded because of a combination of it being a good investment and because he told a good story in the application—which all potential lenders can read. He explained his idea, talked about his research, and was honest about the challenges. In addition, he was a little funny where it was warranted, making him likable. In the end, with peer-to-peer lending, people are lending to other people. Tell a good story and get them interested and you’ll have a better chance of getting that loan.
Please note: Not everyone can put up a loan request on these sites. There are strict credit standards and the loans generally top out around $25,000. Interest rates depend on your credit score.
TIP #7
Barter, don’t buy
When money is tight, you might be able to hold on to more of it if you can barter goods and services rather than use cash to pay for the things you need.
An easy first step is to approach your lawyer, your accountant, your landlord, and any others who might be willing to trade their services for your product. Reaching out a little farther, you can approach other businesses in your area that sell the supplies or services you need.
Getting even more creative, one business told us they traded the labor of an employee who had a special skill, in this case web design, in exchange for the labor of another company’s employee who was great at proofreading. This saved both companies the cost of hiring a freelancer or a contractor to do that extra job.
Finally, there are online barter exchanges where businesses list their offerings and the services they’re seeking, hoping to strike a deal to get what they need without paying cash.
Watch out! The IRS has rules about these kinds of barter exchanges, so it’s very important to check the regulations that may apply before diving in all the way.
TIP #8
Ask your suppliers for funds
You may not realize it, but your suppliers may be willing to lend you funds. After all they have a vested interest in your staying afloat.
New York–based designer (and former Wall Street financial consultant) Aysha Saeed says you should make a list of the companies you buy supplies or services from to run your business. These companies will benefit directly from your success, so why not share your vision and business plan with them? Ask them if they are interested in making a direct investment in your business or if they can give you a line of credit. Aysha recently asked her factory for a $100,000 line of credit and got it. She’ll pay it back in one year and her cash flow problems are solved. The factory granted the line of credit because in the long run, her success means more business for them.
TIP #9
Ask your customers for payment up front
One way to raise cash quickly is to turn directly to your customers or clients.
By offering a big discount to people who pay in advance for products or services they expect to buy later, you may be able to get the money you need now in a pinch. If you have loyal customers, it may also make sense to let them know why you’re doing this. Customers often want to help out a business they’re happy with—especially if they’re saving money in the process.
Case study 1: In Menlo Park, California, Kepler’s Books was just another statistic, another bookstore going under in 2005 in the face of stiff competition from Amazon.com and Barnes & Noble. Unwilling to lose their neighborhood bookstore, a group of committed local customers banded together to help reopen it. They created a “membership plan” where people paid up front to become a Kepler’s member and get discounts on future purchases. For instance, the basic membership costs fifty dollars and buys the customer a member rewards card where they get a ten-dollar store credit for every hundred dollars spent. It also gives people a onetime 15 percent–off shopping spree, as well as invitations to “members-only events.” This offering raised enough money to keep the store afloat long enough to allow it to enact other key changes to its business model that made it viable once again.
Case study 2: In Hastings-on-Hudson, New York, the owner of a restaurant called Comfort ran into difficulties during the past recession and needed money to pay off the cost of some renovations. The banks were not responsive, so the owner turned directly to his customers for help. He let them know he was struggling and basically asked them for an advance. He offered to sell them VIP cards for $500 each that would have a face value of $600. So right off the bat they got a 20 percent discount by using the cards. Doing this raised nearly $40,000 up front with no strings attached, no monthly payments, and no interest fees. Meanwhile, honoring the cash value of the cards required only the cost of the food, labor, and rent. And there was an added benefit—he created a core group of customers who had a very real interest ($500 worth!) in making sure that restaurant stayed open!
TIP #10
Have a bank loan application strategy
Applying for a loan with too many banks can inadvertently work against you.
Too many bank loan applications can bring down your overall credit score by 5 to 10 points each time your credit gets pulled. That means hitting just five banks for a loan can lower your score by up to 50 points.
Monica Mehta, the managing principal of New York–based investment firm Seventh Capital, suggests you start by applying to those banks that know your business and have experience lending in your industry or in your geographic location. Going to the wrong lenders first may cost you more than you realize.
TIP #11
Find a market for the stuff you’re throwing out
Look carefully, there might be a hidden revenue stream being thrown out with the trash! No matter what business you’re in, you’re likely to be creating waste of some sort—from food scraps to shredded paper to who knows what! It might be worth it to find out if there is a commercial use for this trash.
How do you find out? It’s simple. First, figure out what kind of stuff you are throwing out. Then do an Internet search to see what uses there might be for this material. Contact the folks who use it and find out how to sell it to them. The rest is money in the bank.
Case study: Valerio Vindici and Tony DeFilippis are co-owners of Imperial Billiards in New Jersey, a company that makes custom billiard tables. One of their customers noticed all the sawdust lying around their workshop and suggested that they use it to make wood pellets. It didn’t take long for Valerio and Tony to find out that wood pellets are pieces of compressed sawdust that are used to fuel pellet stoves, which some homeowners use to heat their homes.
Today these pellets account for 40 percent of the company’s sales and have become a steady source of revenue.
TIP #12
Be ready with a photo pitch on your phone
Have your cell phone loaded with photos to help you with an impromptu presentation. Gayla Bentley of Houston, Texas, knows a thing or two about successful pitching. She got Barbara Corcoran and Daymond John interested in her plus-size clothing line on the show Shark Tank. Gayla’s tip is simple: You never know when or where you’ll encounter someone interested in your business. Make sure you have an easily accessible link on your smartphone with photos of your product, service, or website so you can show that person a great visual of your business in seconds. On a plane, in a taxi, at a networking event—you always carry your phone; why not make it an easy elevator-pitch accessory? Makes perfect sense to us!
CHAPTER TWO
GETTING IT OFF THE GROUND
Launching a new company, product, or service
TIP #13
Focus on the “why”
When you want people to get excited about your company—whether it’s an investor, a potential partner, a customer, or even your employees—you need to explain exactly what your company does, but you should really focus your presentation on why your company does it.
Why? Because people can become inspired by your passion for the work you do even if they’re not particularly inspired by the work itself. Focusing on that passion, the “why,” won’t stop you from talking about what you do, but it will establish a context of why your work is important to you and therefore why it should be important to them as well.
Simon Sinek, the author of Start with Why: How Great Leaders Inspire Everyone to Take Action, introduced me to this idea early on in the life of Your Business and I have since repeated it to so many others. Simon’s theory is that while people may start working with you because of “what” you do, they’ll stay loyal to your company because of your vision—“why” you do it. So don’t be tempted to spend your time talking about “what” when you’ll have much more impact if you focus on the “why.”
How I use this: Simon sat down with me to illustrate what he meant. He asked me about the “why” behind GoodSearch and I told him, “We are an online shopping mall and Yahoo-powered search engine that donates about a penny per search and a percentage of each purchase to the charity or school of the user’s choice.” Simon looked at me and I immediately knew I had said the wrong thing.
He then asked me a series of questions including: Do I like working with my brother as a co-founder? What did I do as a hobby when I was in high school? How do I spend my weekends? Admittedly the session felt more like therapy than a business meeting. But in the end, we had found my “why.”
I believe that the opportunity to do good should exist every day and not just when we write a check to our favorite charity. GoodSearch gives people the ability to do good in their everyday lives. It is this “why”—the reason we started GoodSearch—that is helping it to become a transformational new approach to philanthropy. At the end of my conversation with Simon, it was clear that the “why” of my company is much more magnetic than the “what.” And once you hook them with the “why,” the “what” is easy!
TIP #14
Get fresh ideas from your team’s brainstorming meeting
Make sure you get input from everyone at your brainstorming sessions. The theory behind brainstorming is that people in a group are more likely to come up with creative ideas than they would if they were working alone. Well, that might be fine in theory, but in reality many of your best people might not be so good in groups. Often, teams are dominated by a few highly outgoing types who control the conversation while the shy, more reflective types never have their voices heard.
If you’re really looking for a fresh perspective, it’s the quiet ones you’ll want to hear from. That can be hard when they usually get shut out of the conversation. Here’s how you can be sure to get everyone’s input.
Before calling your staff in for a brainstorming session, send an e-mail around to everyone who’s invited. Let them know exactly the topic you will be tackling in the meeting. This gives all the participants some time to come up with good ideas before even walking through the door. Then, during the meeting, you can go around the room one by one and be sure that everyone has the time to offer something. As is the nature of brainstorms, those good ideas will then spark the group to generate even better ideas.
How I use this: We always ask everyone to come into brainstorming meetings with three ideas on a particular topic. Since we started doing this, the ideas that have come out of the meetings have been much more creative. Why? Well, let’s face it. Our entire staff is incredibly busy, and in the past when we’d call a meeting, chances are some people didn’t even take three minutes to think about the discussion topic ahead of time. As a result, the meetings were slower to take off and people were a little less engaged. Now, with the three-idea rule, everyone’s excited to share their ideas, since they’ve take the time to come up with them, and the brainstorms are much more productive.
TIP #15
Make sure you own your material
If you hire a consultant or contractor to do work for you, as a general rule anything they invent or create will belong to them unless you have made a contractual agreement in advance. For example, if you get someone to write a piece of software, even though it was for your company, the contractor may own the software and be able to do with it what he or she wants—even give it to your competitor! The same goes for design.
Intellectual-property lawyer David Weiss, of Knobbe, Martens, Olson & Bear, says you should consider this issue during the hiring process. You may have to pay more to get the rights assigned to you, but depending on what you’re having done, it may well be worth it!
Please keep in mind that having a “work for hire” provision in your agreement may not be enough to cover this. Your agreement should include a “fall back” clause that states that in the event any copyrightable material does not qualify as a “work made for hire,” the material is assigned to you. The agreement should further explicitly assign other types of intellectual property to you, such as inventions, trade secrets, etc.
Be careful: Marianne Carlson, otherwise known as “Your Granny Geek,” says that if you hire a developer to create your website, make sure you own your domain name, not them! Often, web designers purchase the domain names in their own names. This means that they can restrict your access to your own site.
TIP #16
Test your product idea with your audience before actually developing it
Problem: You have an idea for a new product or service but aren’t sure if your customers will be interested in it.
Solution: Put the idea out there and see how many people sign up for it—even before the product or service exists! Here’s the thing—if you simply put up a survey asking people if they would be interested in your new service, chances are a lot of people are going to say yes because they like you and/or the service you currently provide. But how many of those yeses will actually turn into sales? It’s hard to guess.
You don’t have to. Let your customers know that you have XYZ product available and that they should sign up for it if they are interested (do not let them know that this is simply market research). The number of responses you get will give you a clear indication of interest. If you decide to go ahead with the product, you can let the people who expressed interest know that it’s coming soon. If you decide not to, you can let those same people know that you have decided not to go ahead with your plans. Since they dedicated neither time nor money to this, you will most likely not make anyone upset with this change.
Case study: Silvia Dontcheva, who runs Uptown Soap Co. in New York, makes gift soaps, lotions, candles, and solid perfumes. Each time she comes up with a new product, she creates a digital image of what it will look like and offers it to her clients. If they love it, she goes into production. If nobody’s interested, she’s spent nothing on giving it a try!
TIP #17
Never do a fifty-fifty partnership
Don’t set yourself up for a painful standoff. A fifty-fifty partnership has a nice ring to it when you’re first starting up a company. All for one and one for all. Unfortunately, as the company grows and the valuation increases, this kind of structure can bring important decision making to a dead halt.
When Gary Erickson started up his company Clif Bar & Company in 1992, it was a small project fueled by little more than his excitement for creating what he thought was the first good-tasting energy bar and sharing it with his buddies. Back then, he says he didn’t bother with legal advice, and in the long run he paid a very high price. When the two co-owners received a buy-out offer of $120 million, Gary’s partner wanted to take the offer but Gary did not.
The fifty-fifty partnership created an impasse that wasn’t resolved until Gary agreed to pay his partner her share of what they would have received from the buyer if they’d sold the company. Gary doesn’t regret keeping the company, but he says he should have been more careful when he set up his partnership and that he should have kept a majority interest for himself. If he’d done that, he says he’d have saved himself millions of dollars and a ton of stress.
TIP #18
Create a buy-sell agreement with your partner
Don’t enter a partnership without a solid exit strategy. When you enter into a partnership with someone to start a business, it’s hopefully because you trust and like that person. But can you say the same for their spouse?
From day one of your partnership, create a buy-sell agreement, which spells out what happens in the event of the death, disability, or retirement of one of the partners/owners. The surviving partners will most likely want to continue running the company without having to answer to the departing partner’s beneficiaries (such as their spouse or children).
You’ll need to get a lawyer to write up this agreement (or if you want to spend a little less money, you can go to a site like RocketLawyer.com or LegalZoom.com). In order to prepare yourself, Leslie Thompson, managing principal of Spectrum Management Group in Indianapolis, says these are the key things to think about:
How are you going to value your business at the time of this event? Deciding on that methodology ahead of time reduces the chances that you’ll be fighting over valuation numbers down the road.
What are the events that will trigger the buy-sell agreement? Death and disability are the most typical, but other reasons include bankruptcy, divorce, retirement, or a general desire to sell an individual’s interest.
How is the purchase going to be funded to not compromise the liquidity needs of the business? In the case of death or disability, the use of life and disability insurance to fund the buyout is the most common. In the event of retirement or an owner’s desire to sell, it’s common to provide a structured buyout over a period of several years.
Determining your company’s value: Valuing a private business is a tricky thing to do. If both sides cannot decide on a formula, here’s another thing you can try. Agree upon a process whereby if, at the time of the trigger, you cannot agree on a price, you hire an appraiser. If both sides don’t agree with the appraiser’s value, each party can pick their own appraiser and those two appraisers can then pick a third appraiser. From that point on, either the third appraiser can be the deciding appraiser or it could be an average of the three of them. Yes, it’s complicated, but it keeps it fair and in the hands of people who are objective.
Continues...
Excerpted from It's Your Business by JJ Ramberg Copyright © 2012 by JJ Ramberg. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Introduction ix
Chapter 1 Finding Your Funding 1
Attracting investors, getting loans, and tapping other sources of capital
Chapter 2 Getting It Off the Ground 19
Launching a new company, product, or service
Chapter 3 Being the Leader 42
Understanding your business and yourself
Chapter 4 Creating Your Team 72
Hiring, firing, evaluating, and other HR issues
Chapter 5 Managing People 95
How to get the best from your employees
Chapter 6 Closing the Sale 116
Selling your goods or services
Chapter 7 Cultivating Customers 146
Getting and keeping your customers
Chapter 8 Getting Your Message Out There 188
Marketing your company and courting the press
Chapter 9 Building Relationships 215
Networking and communication
Chapter 10 Controlling Costs 235
How to keep expenses in check
Chapter 11 Running the Office 249
Keeping things running smoothly
About the Authors 269
Acknowledgments 273
Contributor Index 277
Company Index 281
What People are Saying About This
For anyone in the Small Business space, this book should be opened in the way one would open a treasure chest.
— Robert B. Cialdini Bestselling author of Influence: Science and Practice
Start with #4, #41 and #84 and you've already made the book worth your time.
— Seth Godin Author The Bootstrapper's Bible
Ramberg gives you the entrepreneurship advice that you need to succeed. This book contains many unexpected lessons from an assortment of entrepreneurs so wide-ranging that they could only be found by the one woman who knows them all: JJ Ramberg.
— Guy Kawasaki,
Author of Enchantment and former chief evangelist of Apple
If you own a small business, or are thinking about starting one, this book can help you avoid costly mistakes and help you learn many of the inner secrets of running your own company.
-Tony Hsieh,
NY Times bestselling author of "Delivering Happiness" and CEO of Zappos.com, Inc.