Archive for the ‘Tips, Tools, Services’ Category
How to Attract Great Advisors to Your Venture
Sunday, January 22nd, 2012Looking 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.”
Our Thoughts:
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.
Q&A: Pricing for a Startup
Wednesday, November 30th, 2011
Question:
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.
Answer:
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)
and
Real Time Marketing for Business Growth
Ask your own question to the ActSeed team here: http://actseed.com/contact-us/
Marketing That Works
Monday, November 28th, 2011
This is one of our favorite marketing reference books for entrepreneurs and startups.
Make sure this book is in your own entrepreneurial library.
This book explains how the good steak can sizzle without leaving you with just an aroma. “Marketing that Works” was written by some of the best minds in startup marketing who have held prominent positions in blockbuster startups, idealab!, Wharton and venture capital: Howard Morgan of First Round Capital, Leonard Lodish of Wharton and Shellye Archambeau, former president of Blockbuster’s e-commerce division.
This book includes practical approaches (not just theoretical!) to developing business ideas, pricing, market validation, distribution and channel strategies, product launches and more.
To buy a paper copy or download a Kindle version from our bookstore partner, Amazon.com, click here.
Are You Three Feet from Gold?
Monday, September 19th, 2011Entrepreneurs, small business owners and founders of startups tirelessly work toward turning their business vision into a commercial reality, and possibly a metaphorical gold mine. While the destination and even the journey can be rewarding, it’s often lonely and frustrating to the point entrepreneurs often give up. If this describes you, then read “Three Feet From Gold” before making your final decision to throw in the towel. It may be a life-changing choice.
There’s no doubt that Napoleon Hill has influenced many generations of leaders with his research and writing that stems from a 1908 encounter with Andrew Carnegie.
Hill’s principals have been artfully brought into today’s business landscape with the book, “Three Feet from Gold”. ActSeed champions books and individuals who can both educate and inspire. Sharon Lechter and Greg Reid do this well.
When you buy this book, buy a notepad, too. This is one of those books that inspire you to take notes and then muster the tenacity you need to pursue your own purpose.
As the book states, the greatest reason for failure is quitting. Don’t even consider quitting until you have read this book.
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Impact Your Business
Saturday, June 11th, 2011Many entrepreneurs are “allergic to the numbers side of the business”. Part of the high failure rate of small businesses is due to avoiding and ignoring basic financial principals.
Ken Kaufman’s book explains the essentials of small business finance and how to easily apply them through the use of allegory. In other words, he uses “good ol’ fashioned story-telling” to make even the most finance-phobic business owner learn and appreciate the need for quantitative, financial management.
This is not just a story about Steve, a man struggling as a small business owner, a husband and a dad. It is a guide penned in a way we can all identify with. It goes beyond merely being clever about teaching financials.
For example, in Chapter 23, the protagonist (Steve) starts to see, from his own experiences, how anxiety and clarity are negatively correlated. This is a non-financial lesson we all must learn and respect. This book is full of well-articulated insights that we all face as business owners.
The first time you read it, Kaufman’s book is an enjoyable story that “hits home”. Then, it becomes a very useful reference guide for the next hundred times you’ll take it off your bookshelf.
You can get your copy of “Impact Your Business” here.
The Realities of Being an Entrepreneur in One Book
Friday, May 6th, 2011“Most people start businesses simply because they just don’t like working for someone else.”
If this quote resonates with you, or even if you have another motive for becoming an entrepreneur, you should read this book.
Scott Shane packs this book with statistics and information that really helps you understand the realities of building a business. If you are a true entrepreneur, this book should sober your expectations and then bolster your resolve. If you aren’t quite there yet as an entrepreneur, this book will properly discourage you from burning too much of your own time and money (not to mention the time and money of others) until you are truly ready to “do it the right way.”
In this book, Shane shares statistics and data about where funding comes from for new business creation, what impact VC and angels have on new business creation, which industries receive most of their funds and who may likely be the best source of funds for your own business. He shares data about how long it usually takes to “turn the corner” with a new business and the demographics of entrepreneurship, too.
The Illusions of Entrepreneurship pulls data from a multitude of resources, including the Federal Reserve Survey of Small business Finance and the Center for Venture Research in New Hampshire. Essentially, Scott Shane has condensed thousands of pages of research into a single, coherent book.
This book is one of the first ones you should read if you are contemplating the plunge into the world of entrepreneurship.
You can purchase this book from ActSeed’s Amazon store here.
Enjoy!
TweetsByUs: How ActSeed Benefits From Twitter
Tuesday, March 29th, 2011Much of the early success in creating awareness of ActSeed and engaging entrepreneurs has come from leveraging social media. This includes Twitter, which is an excellent medium to engage and interact with the entrepreneurs and others who value our mission and our purpose. While Twitter can be an excellent conduit to engage, it can also be distracting, cluttered and frustrating if you don’t really understand how to utilize it properly.
To make sure we have a meaningful, quality interaction with all of our Twitter followers, we have partnered with TweetsByUs, a service provider that continuously manages twitter accounts for all sizes of businesses, from startup to enterprise.
Why we like TweetsByUs.
TweetsByUs uses proven strategies to gain targeted followers, increase ActSeed’s brand exposure, and attract new clients. They can oversee the entire process including tweeting, providing content, responding to replies, and promoting ActSeed as an involved thought leader. While ActSeed maintains active internal engagement with its Twitter followers, the TweetsByUs team has become a part of the ActSeed family and our mission, so they don’t feel like some “outsourced partner”, but rather an integral part of our team and our mission.
Again, what makes TweetsByUs stand out in a sea of Twitter services is their focus on quality that is aligned with ActSeed’s own commitment to managing a high value business community. Other services promise increases in number of followers or a minimum number of tweets per month, but can they create meaningful relationships that turn into real clients and partners? From our work with TweetsByUs over the past year, we know they spend time to help us provide meaningful content, develop our community, and engage prospects.
If you have not already discovered the benefits of Twitter or how to utilize Twitter for your own clients and community, then you should contact TweetsByUs and explore how they can help you create and implement an effective strategy. If you have an existing account, they can be a reliable and cost-effective way to help you grow and manage your followers. Given our own experience, we can confidently recommend them as a valuable and cost effective service provider to manage your company’s social media outreach.
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Owing Taxes When Your Biz Doesn’t Generate Cash
Friday, March 11th, 2011Yes, this can happen. No cash to you, but Uncle Sam and your state still expects to be paid. Our friend and valued colleague, JoAnne Berg, CPA and founder of Peer Coaching Network Inc., has allowed us to share her thoughts on this topic as we approach Tax Time.
“Understanding Why Your Business Owes Taxes When It Didn’t Generate Any Cash”
by JoAnne Berg, CPA
Peer Coaching Network, Inc.
Your business has several silent partners: Uncle Sam and his state and local cousins. Many of the decisions you make on a daily basis will impact their take, so it’s wise to be at least somewhat familiar with the tax laws when you run your own business.
One of the most important financial metrics for most businesses is “How much cash did we generate”? However, business owners sometimes do not realize how much taxable income (not cash income) their business generated during the year. Then, at the end of the year, they get a tax bill that they do not expect. This can wreak havoc with cash flow and business growth plans.
Here are a few of the situations that can cause this, and some ideas for how to deal with them.
Your business is required to pay taxes based on the accrual method of accounting, but you’re keeping your books on the cash method.
- Under the accrual basis of accounting, you must record income when you make a sale, not when you get paid. In general, this applies to any business that sells goods from their own inventory such as retailers, wholesalers, distributors and manufacturers.
- However, the amounts you pay out for inventory are not deducted from your net income until the inventory is sold. For many businesses, a lot of cash is tied up in inventory, so it’s not hard to see how you could have taxable profits but no cash!
- It’s extremely important to handle your inventory and sales accounting correctly. Be sure to have your bookkeeper or accountant prepare your monthly financial reports using the accrual basis. It’s worth spending a little more money here on good financial reporting.
- From a business planning and management standpoint, this is where good inventory and credit management techniques come in. Learning how to manage your inventory levels so that you don’t have any more goods on hand than you need to run your business profitably, and managing your receivables so that there isn’t a long lag between the time you make a sale and the time you get paid for it, both make a significant difference in your cash flow and your profitability.
You paid off debt, or bills from last year, during the year.
- Debt repayments are NOT tax deductions!
- If you’re finally becoming profitable and are paying off the loans and credit cards that helped you start your business, remember that you already deducted the expenses that those loans and credit cards paid for in a previous year. This means that your taxable income may be more than the net funds generated from the business during the year.
- From a business management perspective, ask your accountant to prepare a Statement of Cash Flows along with your monthly Balance Sheet and Income Statement. This will help you really understand what’s going on in your business because it reconciles your net income with your cash flow.
You’ve invested in equipment, vehicles, or other assets that are needed to run your business.
- The Federal tax law allows for many of these purchases to be deducted immediately from your taxable income instead of being depreciated over time. This is often referred to as the “Section 179 deduction”.
- This is a great deal, but there’s a trap here. Many people do not realize that this is a tax DEFERRAL, not a tax SAVINGS. The tax savings reverses in future years because you won’t have the depreciation deduction in those years– you used it up when you bought the asset.
- If you think your tax rate will be going up, you may be better off taking the depreciation deduction in future years, when it will save you more money.
- If you finance the purchase with debt, you need to be very careful. A typical scenario is that a business owner buys an asset, finances it, and then takes the Section 179 deduction, saving taxes in year one. However, in future years, they have debt repayments, which are non-¬‐deductible, and no depreciation expense to report. The result? Taxable income is higher than the cash generated from the business. This can result in cash flow problems if you haven’t planned for it.
- From a business planning and management standpoint, think of the tax savings from the Section 179 deduction as a loan from the government that you will have to pay back.
These are just a few examples of what can happen. Taxes can become complex very quickly when you have a growing business with multiple types of transactions. To avoid surprises, always have your tax professional do a tax projection for you well before it’s time to pay your taxes, so that you can make informed decisions when you’re running your business – you’ll be glad you did!
JoAnne Berg, CPA is the founder/CEO of Peer Coaching Network, Inc. in Carlsbad, California. She is a trusted business advisor with over 30 years of experience as an entrepreneur, CFO/COO, and CPA/advisor to closely held businesses. Read her blogs at The Art of Small Business. You can follow her on Twitter @JoAnneBerg and on Facebook.
How to Write an Effective Business Plan in the 21st Century
Tuesday, December 28th, 2010David Ronick has penned a winner.
If you’ve never drafted a business plan (and need to), “Hit the Deck” is a great investment.
The title of Chapter 1 is “You Need a Business Plan. (Yes, This Means You)”. We absolutely agree, so we read further.
We’re glad we did. Ronick really “cuts to the chase” about what a business plan of the 21st century should look like and why it’s important not only for pursuing investors, but even more for the entrepreneur to set a solid foundation to enter the marketplace and complete.
Lots of step-by-step guidance and examples.
If you’re new to investing, it’s a great book for you to read as well; here, you can learn what you should be understanding and what you should be seeing from the entrepreneur pitching you an idea.
The days of a business plan looking like a 48 page master’s thesis are gone. David shows you how to craft a solid plan quickly and with both internal and external impact. Again, it’s a book you should add to your library, a quick read, and won’t set you back more than $15 or so.
You can buy “Hit the Deck” by clicking here.
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Recent Congressional Act May Be the Catalyst You Need to Secure Your Investor
Tuesday, November 9th, 2010If you have been “doing the dance” with a prospective investor who’s “almost there” with respect to investing in your company, we just received a tip worth sharing from Portland, Oregon law firm Roberts Kaplan that might be a positive tipping point for your negotiations. 
Apparently, the US legislature recently adopted new Act that effects small business investments. Within certain limitations (see some below), investments between September 27, 2010 and December 31, 2010 may qualify for a 100% exclusion of gain from the sale of small business stock.
From an investor’s standpoint, this could be HUGE and from an entrepreneur’s standpoint, anything that is this beneficial to an investor certainly has to factor positively in a decision to complete the deal.
The limitations on a qualifying deal may include:
- Must be made before year-end
- Company must be a C Corporation
- Investment must be held for 5 years
- Available only to non-corporate taxpayers
- Direct /original issue by the C corporation (can be through underwriter)
- The business must have assets of less than $50 million
- The business must also use 80% of its assets in a qualifying active business (no financial institutions, hotels, restaurants, farms, professional service firms) for substantially all of the holding period
Again, this may be helpful in raising capital by year end if you have potential investor “on the fence”, but here’s where ActSeed provides its disclaimer: While this interesting tip may be useful for you to explore, you should do it with an attorney and possibly even an accountant.
If you don’t already have an attorney, the folks who shared this information with us may be able to guide you and one of their specialties is working with small businesses and startups around the USA. For more information, contact Cliff Spencer at Roberts Kaplan: 503.221.0607. ActSeed is not compensated for referrals, but as always, we want to continue our mission to bridge capital from where it resides to where it is needed.
