Archive for the ‘Q&A’ Category
From the “Ask ActSeed” files…
What is your advice on starting a restaurant?
How would you approach it?
1. Check out the resource documents on the site: “The Restaurant Wizard“, where you can find introductory information about food and labor cost control, reporting, setting up a chart of accounts, and more.
The site’s owner, Scott Armstrong, is a consultant to restaurant owners and based in southern California. If you like his articles, he may be a good consultant for you to consider engaging. These articles have a lot of helpful business tips unique to operating a restaurant.
2. For the general business-starting issues, join ActSeed’s Entrepreneur Group. Here, you have a blueprint for starting any business – restaurants included. Even if you are just in the idea stage, this will help you. ActSeed generates scores for the preparedness of an early stage business in 7 core areas, so you can quickly determine where you need some additional preparatory work before launch and during the first few years of operation.
Here’s a link to a 5-page overview about ActSeed’s business blueprint process and how it will help you get your company off the ground.
A question from Sean through our Ask ActSeed service…
I am looking for some quick funding. Do you have any resources?
We have seen deals from connections within ActSeed.com happen quickly, but investors and lenders aren’t keen on making a decision without full information. The ActSeed Entrepreneur Group profile can be completed in an afternoon if you’ve already mapped out your business model in some way. The key to quickly move from intro to deal usually depends upon how quickly you can demonstrate that you can implement the idea and make money for you and the investor. Getting the key info on the table fast is what ActSeed.com helps with.
The process to find investors through ActSeed is:
- Register on ActSeed.com and then
- Join the ActSeed Entrepreneur Group
- Complete the two Company Profile screens (public and private info)
- Search ActSeed’s network of investors (Investor Group) and
- Contact investors that you find who seem to fit your deal
ActSeed Investor Group members will also be looking for deals that fit their interests and may contact you directly.
There’s a nominal membership fee that supports the services ActSeed provides. It’s a month-to-month fee, so there’s no long term commitment and we don’t take any of your company’s equity.
If you’re looking for someone to invest based upon a loose concept without much detail and without spending any money, then the best place to look is to the people who already know you well, as they will be investing because they know you personally, and their evaluation of your business will be largely based upon your personal relationship.
In summary, if you are asking friends and family for funding, you can sell yourself first. If you are asking strangers for funding, be prepared to thoroughly sell the business model and your plan for its implementation.
We wish you success in finding your funding, and thanks for sending us your question.
The ActSeed Answer Team
Q. Would you be able to point me to a resource – book, website, etc. – that I could learn about risk taking and how to do it?
A. Check out a book called “Fearless Living“. The author has a lot of interesting things to say about fear and risk; they kind of go hand-in-hand.
Stretch, Risk, Die.
Rhonda explains the zones of fear and comfort (“stretch, risk and die”) in a very straightforward way. Fear is often as much a part of an entrepreneur’s life as risk. Building a startup often has daunting moments. Starting a business can be intimidating. Managing, coping or resolving fear is critical, and Rhonda Britten’s approach is one of the best.
Looking for wisdom? So are your competitors and fellow entrepreneurs. Here are some thoughts about how your company can increase its odds of landing in-demand advisors.
Recently, we received a question from an entrepreneur: “We are a technology startup and have got to a level of mild traction with a user base that’s engaged. Now that we know that we are creating value its time to transcend to the next level and get a great set of advisers on board and we are not looking for big names but advisers who are proactive and interested in what we do. Any tips on going about and getting great advisers on board would be useful.”
The tactics for attracting good advisors are similar to the tactics for attracting a top team. Be prepared to compensate them.
Sometimes equity is enough of a lure, but most advisors don’t get excited about a single digit or fraction of a percent ownership to really dig into an advisory role. Compensating the advisor with even a nominal consulting fee is a strong signal that the advisor is valued and is viewed as a signal that value is expected from the advisor in return.
Good advisors are usually in high demand by many more startups than can be served; therefore, it’s important to understand that relevant wisdom isn’t a commodity, but rather a scarce resource. In today’s economy, cash is king more than it used to be. Investors want to see customers paying cash, not consuming free services. Employees want to see cash, not just stock options in expectation that a small slice of equity alone will be worth something material in the future.
Establishing a solid core advisory board – formal or informal – means choosing a select few (not trying to “collect lots of names for the letterhead”) and treating them like a co-founder. Engaging them equally. Listening to them equally. Compensating them properly. Expecting value accordingly.
Founders who don’t understand this should consider just asking an occasional cold-call question to various subject matter experts, but not expecting an advisory relationship with much substance. Too often, founders don’t manage or engage or compensate advisors properly and then blame the advisors for not being useful, helpful or valuable. Too often, the founder-advisory board relationship is structured for failure or at best, it turns out to be a mild distraction to all involved.
You may find advisor candidates who are interested in what you do, but you still must find the right amount of equity and/or cash compensation to make those who are interested also proactive and committed.
Instead of a conventional perspective of “seed money is the first step towards validation”, the mantra today is likely the converse: “validation is the first step toward seed money.” In more than half of all startups nowadays, the initial validation comes from the wallets of the founders (i.e. first phase is bootstrapping). If the marginal costs of starting a business includes some compensation to key individuals in the budget, the prospects of beating out a competing startup for that same wisdom is very good, and this early tactic sets the pace for startup success, just like proper planning and preparation does.
In summary, wisdom is often a scarce resource. Like anything of value, be prepared to pay a fair price for the advisory expertise you need and your chances of acquiring that wisdom will increase.
How can a start-up business figure out what to price their service? I started an online/app advertising company for bars and restaurants. I need to figure out what to charge these businesses to be listed after their free trial is up at the end of the year.
Pricing a new product is a common challenge of many startups; we completely empathize with your situation.
First, you may want to extend your free trial for an extra month or so if you don’t feel you have the right pricing strategy.
Now, to figure out your ideal pricing strategy, have you done any test marketing or “voice of the customer” / focus group type events? Polls? Do you have a large base of free trial users? If so, you might tap some of them for an open discussion in return for an extended free use period.
We also suggest some paid adword activity with varying “calls to action” at different price points to see what the pull is. This can be done on Facebook or Google. You can also test marketing messages this way. If you can spend some money on a direct email to a list that fits your industry, it’s also a way to test pricing in the message to see how many click-throughs you receive.
As we’re not experts on pricing, we recommend two good books (click on each title below to find each book) that address pricing as part of startup marketing:
Marketing That Works (Wharton School Publishing)
Ask your own question to the ActSeed team here: http://actseed.com/contact-us/
Q. What does it take to get someone to invest in my company?
A. This question is one of the most frequently asked from entrepreneurs. It’s not just about finding investors, but convincing them to invest in you. Of course, you need a compelling business idea. That’s step one. The next step is equally critical, though. You must convince the investor that YOU are able to transform that compelling idea into a profitable or sustainable business. What you must do: speak the “language” of investors – be able to express your business model in numbers, words and pictures. Make sure you have covered all of the issues investors typically want to know. How to do this: while there are many approaches, we suggest you join ActSeed’s Entrepreneur Group where we guide you through all of these issues, and you can tackle the issues at your own pace and in the order you choose. Here’s a link to a 5-page overview of the issues investors want to know, with a link on how to join ActSeed’s Entrepreneur Group at the end of the document: http://bit.ly/PrepMatters_WP. You only get one chance to make a first impression with an investor; let ActSeed help you make the best first impression.
Q. How important is having a separate business account for accounting if your are a sole proprietorship and will it affect taxes at the end of the year?
A. We strongly suggest having a separate business and personal checking accounts, even if you are a sole proprietor ship. It will make it much easier for you and your accountant to separate your business expenses from your personal ones, and you want to make sure you are getting all the deductions available to you.
Ask your own question here: http://actseed.com/contact-us/