Start-up Tip #1 - What is Your Value Proposition?

Thinking of starting a business? As part of your planning process, you must come to grips with what your value proposition is. In advertising we used to call it a "unique selling proposition". But really all you're doing is figuring out what the true value of your business, product or service is.

How are you filling a real need in a unique way?

As you prepare to answer this question, think about who will use your product and why.

If you can answer this question in a 45 words or less, you are on your way to success.

Contact me, if you want more tips on crafting your value proposition.

Tip of the Week - Take a Look at Your Finances

I once had a client who had no idea what his bank balance was. He had an approximate idea what the company was spending or taking in each month, but no detailed knowledge. He was too busy selling. And he was a great salesman. Driving everywhere, never tiring, always looking for opportunities. But how can you run a business without understanding your numbers?

Recently, I've been hearing people say that they don't even want to look at their investment reports or their bank statements. With the recession hurting everyone, that's an understandable reaction. It can just seem easier to hide or to ignore the bad news.

But a business owner cannot afford to do this. If you're a start-up or a going concern, it's time to look at your books. This is a time when you should really ask yourself how you can save money and send more to the bottom line. If you're starting out, can you bootstrap and grow organically? Do you really need a loan or even an angel investor? You can only know this by looking at your finances.

The simplest action you can take is to get our your checkbook -- or go online and look at your bank statements -- and see how much you are spending and taking in each month. Then, create a spreadsheet on your computer with Excel, using those numbers. Put your expenses into the usual financial reporting categories - sales, cost of good sold, overhead, interest, operating profit, net income, etc. If you have an accountant or bookkeeper, get them to show you the books and explain things to you.

A lot of entrepreneurs are not that great with numbers or even using Excel or QuickBooks. But Excel provides a great way to keep track of your finances. Once you've put in the formulas, and copied numbers out of your checkbook, you can see where you've been and forecast the future. You can see how changes in your assumptions about the future will affect the bottom line. You can see how much cash you'll have to cover your operations and how much you might need to borrow. Understand your cash flow. Look at the timing of the revenues and expenses. How can you handle the gaps?

If your credit card companies are killing you with higher interest rates, you can see the effect and maybe try to talk them out of it or switch to another company that will give you better terms. If your bank is cutting your line of credit or raising your interest rates, you'd better be able to understand the impact. But look at the effect on your spreadsheets first. Knowledge is power. And your numbers tell your business's story.

If you don't want to use Excel, for Pete's sake, just sit down and do some figuring with pencil and paper. Think about holidays, seasonality and other things than can affect your revenue and your costs. If you need help, "Excel for Dummies" is a good book for explaining what to do. The SBA's Web site also has a lot of great information on how to do financial forecasting. www.sba.gov. It can help you understand the difference between an income statement and a balance sheet.

I can offer help, too. One hour of consulting for less than a lawyer or accountant would charge. Contact me at upstartwyn@gmail.com or at Twitter: www.twitter.com/upstartwyn

$10 Business

Could you start a business with only $10 to spend? A good friend sent me an article about a professor at the University of Alabama who has each of his students start a business on $10 or less. The students have to plow any profits back into the business. Most of the kids started typical student service businesses, and most of them made some money. But a few started more unusual businesses, and some made a couple of thousand dollars.

The students liked the project because it really made them focus on the essentials of what it takes to start a business. Some said it was the best course they took in college. Professor Armstrong says it makes people realize how resourceful entrepreneurs have to be.

Read more here: http://www.icsb.org/article.asp?messageID=136

Help! I Have Too Many Ideas!

Are you brimming with ideas? Have you developed several different products of services? Are you wondering how to structure a company and position it to investors and customers?

Time and again, I've learned that the average person can only take in one big idea at a time. Investors are people. They simply want to invest in a single, strong idea, product or service. Focus has power. Think of the difference between a flood light scattering light all around vs. the power of a laser. A laser can cut through hard material because it's focused.

Think of Amazon. They started with books. Only after succeeding with books did Amazon branch out into retailing other items.

So focus your energy on your favorite project. You'll be amazed at what you can accomplish.

VC Funding Down

It looks like more start-ups and expansion stage companies are going to have to bootstrap, rely on organic growth or seek funding from friends and family. Banks are curtailing lines of credit or raising interest rates to usurious levels. And now the New York Times reports that VC funding is way down. Green technology funding is particularly hard hit. Article synopsis:

Business / Economy

Venture Capital Investment Sinks

By CLAIRE CAIN MILLER

April 18, 2009

In the first quarter, only $3 billion was invested in 549 young companies, according to analysis by the National Venture Capital Association and PricewaterhouseCoopers.

http://www.nytimes.com/2009/04/18/business/economy/18venture.html

Tip of the Week - Does Your Product Fill a Need?

Why do most new products and new businesses fail? There are a lot of reasons, but one of the most fundamental reasons is that the product or service doesn't fill a real need -- or at least a big need.

Some products fill a passing need -- like having fun. A new toy or game that is really fun to play can take the nation by storm because people need entertainment. People love games. Think of games or toys that once were fads -- hula hoops, Trivial Pursuit, Pacman....

But these are not fads anymore. The need to play something new has taken over. Some games, however, last forever -- Monopoly comes to mind. What makes that game endure? Will Sudoku last?

Think of other kinds of games, like tennis. What needs do tennis players have? Clothes that are comfortable, tennis rackets that make hitting easier, balls that bounce well longer, tennis rackets that won't give you tennis elbow, medical devices that help prevent tennis elbow or bad knees...

What needs can you think of?

Products like Under Armor keep you comfortable while playing, the Prince tennis racket when it first came out made so-so players hit more balls well, rackets that reduce vibration put less wear and tear on the elbow, arm bands reduce the shock to the elbow....

Think of all the things you and others do. What needs do the products you use fill? Why do you buy them? Why do you hire people to do things for you?

When you're starting or running a business, you really need to think about how much need is out there. How many people really need your product? Why?

Get thinking. Get doing.

Angel Funding 2008

The Center for Venture Research at the University of New Hampshire says that 55,480 entrepreneurial ventures received funding from angels in 2008. I'm copying and pasting the whole article below.

Angels are funding fewer ventures, but they're risking about the same amount of money as they did in 2007. Angels only fund about 1% of the plans they see. That's why it's crucial to have a really solid business plan to demonstrate why your venture will succeed and return the investors' capital to them many times over. For tips on writing a great business plan, see www.upstartbusinessplanning.com.

Read the article from UNH below. Here is a link, too.
http://unh.edu/news/campusjournal/2009/Apr/01angel.cfm

Angel Investments Down in 2008, But Not Deals

By Lori Wright, Media Relations
April 1, 2009

Angel investments dropped in 2008 by 26.2 percent over 2007, but the number of deals was relatively unchanged, with 55,480 entrepreneurial ventures receiving funding, according to the 2008 Angel Market Analysis released by the Center for Venture Research at UNH.

The angel investor market had a considerable contraction in investment dollars from last year but exhibited little change in the number of investments, according to Jeffrey Sohl, director of the Center for Venture Research at the Whittemore School of Business and Economics.

Total investments in 2008 were $19.2 billion, a decrease of 26.2 percent from 2007 when investments totaled $26 billion. However, 55,480 entrepreneurial ventures received angel funding in 2008, a modest 2.9 percent decrease from 2007 when 57,120 entrepreneurial ventures received angel funding. The number of active investors in 2008 was 260,500 individuals, virtually unchanged from 2007’s 258,200 individuals.

“The significant decline in total dollars, coupled with the small decrease in investments resulted in a smaller deal size for 2008, a decline in deal size of 24 percent from 2007. In contrast to venture capital, in which money must be invested during the life of the fund and is in part based on the size of the fund, angel investing is an individual decision and angels invest from their net worth. These data indicate that while angels have not significantly decreased their investment activity, they are committing less dollars resulting from lower valuations and a cautious approach to investing,” Sohl said.

Healthcare services/medical devices and equipment accounted for the largest share of investments, with 16 percent of total angel investments in 2008, followed by software (13 percent), retail (12 percent) and biotech (11 percent). Industrial/energy accounted for 8 percent of investments, reflecting a continued appetite for green technologies, and media (7 percent) rounds out the top six investment sectors.

“Retail and media have solidified their presence in the top six sectors, mainly due to a continued interest in social networking ventures,” Sohl said.

Mergers and acquisitions represented 70 percent of the angel exits, and IPOs 4 percent, in 2008. Bankruptcies accounted for 26 percent of the exits. Annual returns for angel’s exits (mergers and acquisitions and IPOs) were 22 percent, however, these returns were quite variable.

Angels have maintained their position as the largest source of seed and start-up capital, with 45 percent of 2008 angel investments in the seed and start-up stage, a slight increase of 6 percent over 2007. Angels also exhibited an interest in post-seed/start-up investing with 40 percent of investments in this stage, also an increase from 2007. Expansion stage investing (14 percent) showed the largest decline. New, first sequence, investments represent 63 percent of 2008 angel activity, unchanged from the last two years, indicating a continued preference for new, as opposed to follow-on, investments.

The Center for Venture Research has been conducting research on the angel market since 1980. The center’s mission is to provide an understanding of the angel market and the critical role of angels in the early stage equity financing of high growth entrepreneurial ventures. Through the tenet of academic research in an applied area of study, the center is dedicated to providing reliable and timely information on the angel market to entrepreneurs, private investors and public policymakers. For more information visit www.unh.edu/cvr or contact the center at 2-3341.

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Start-Ups are the Engines of Employment

I've been working with entrepreneurs since the beginning of the last big recession in the early 1990s. I learned back then that start-ups are the engines of employment growth in our nation. This article in Forbes shows that this concept remains true.


"Entrepreneurs
Employment Engine
Melanie Lindner, 01.14.09, 3:10 PM ET

The U.S. economy shed 2.6 million jobs last year--524,000 since Thanksgiving. With any luck, start-up companies will benefit from the sudden tsunami of talent.

Between 1980 and 2005, private sector start-ups accounted for 3% of employment per year, according to Business Dynamics Statistics, a U.S. Census Bureau study (funded by the Ewing Marion Kauffman Foundation) released Wednesday.

While 3% sounds like a drop in the bucket, the number is actually quite significant when compared to the 1.8% average annual net employment growth for the same period. That means that, excluding jobs created by new firms, established U.S. companies tend to lose more jobs than they create. "Micro firms" (those with one to four employees) account for a whopping 20% of new jobs created in any given year.

Will new entrepreneurs thrive in this recession? While the answer clearly differs by industry, the data suggest that the overall number of start-ups only mildly declines during downturns; encouragingly, it spiked during the recession in the early 1980s.

For a closer peek at the data, check out ces.census.gov. And for a look at 10 entrepreneurs who managed to launch future empires atop the shards of devastated economies over the last 200 years, check out "Entrepreneurs Who Rose From The Ashes.""

(http://www.forbes.com/entrepreneurs/2009/01/14/startup-unemployment-economy-ent-fin-cx_ml_0114startupdata.html?partner=smallbusiness_newsletter)





For tips on essentials of business plan, visit my site: www.upstartbusinessplanning.com.

10 Tips for Starting a Business - Tip # 6 - Get the Word Out

Despite the cliches, if you build it, people will not necessarily come. If you build a better mousetrap, the world will not beat a path to your door.

How will people -- customers -- know that you built the baseball field in the middle of a corn farm or a better mousetrap?

You have to get the word out. You can try word-of-mouth, which marketers sometimes call "viral marketing". That works sometimes. You probably don't have money for a big ad campaign. Lots of dot-coms that advertised on the Super Bowl during the technology boom failed because they spent too much money on advertising and marketing.

What you need to do is make a plan. Figure out who will buy your product and what you need to tell the potential customers about the product or service. Then, figure out the most efficient and effective way to get that message across to the target.

This can be PR -- putting articles into papers, contacting local news TV and radio stations. Or it can be going to trade shows and running small ads in the trade press or getting articles into the trade press.

The most effective and most essential thing you can do, however, is to create a website. It can be simple. But if you optimize it for the search engines, you'll get traffic. You can always refer your potential customers to your website so that they can read your story and see your products or understand your services.

See the article on search engines and local search that is in my list of articles on the right. Free local listings can be highly valuable for a start-up.

Contact me with marketing questions or comments - upstartwyn@gmail.com.

10 Tips for Starting a Business - Tip #3 - The Big Idea

They say that necessity is the mother of invention. That's why big needs help inventive people come up with BIG IDEAS. You know there's a need. You know there's a big, growing market with that need.

How are you going to fill that need? What is your BIG IDEA?

Your idea for filling a need can be born from a passion you have or simply a frustration. That's how Airborne was invented. A second grade school teacher was tired of getting sick. She created an herbal concoction to help her immune system fight off germs. The product is wildly successful.

From the Airborne website: "Airborne is the best-selling herbal health formula that boosts your body's immune system. It was created by a former second-grade school teacher, Victoria Knight-McDowell." http://www.airbornehealth.com/about_index.php

One of my own clients saw a need in the marketplace for videos that enable people to talk about their passions and the products they are loyal to. It's called Loyaltv.com -- www.loyaltv.com. My favorite video on the site is the one about the Camry. That video lets people see so much more about that car than you would ever get from a car commercial or even the Toyota website. This site fills people's needs to learn more about products from real people telling real stories. I'm thinking of going out and making some videos like this myself. I want other people to know about the products I think are great.

Now, some people approach this whole business development dynamic differently. They have what they think is the Big Idea and then look to see if there is a need and a market. That's OK, as long as you have all three elements.

What is your big idea? Is it big enough to catch on in the marketplace? 8 out of 10 new products die. What will make yours survive?

Ten Tips for Starting Your Business

Lots of people think about starting businesses. But if you really want to do it, you have to clear away the cobwebs of your mind. You have to start thinking strategically and logically. I don' t mean that you can't have passion. You won't succeed without passion. But you do need to become focused.

Tip 1: Decide what you really want out of your business. Where do you want to be in five years?

Stay tuned. More tips to come.

Great Time for Start-Ups

In a blog called "Online Spin" David Morgan, who is EVP for Global Advertising Strategy at AOL, says he's leaving for a start-up. Why leave a great job like his for a start-up in this melting economy? Some people say that businesses started in a recession that survive usually go on to become very sound and successful. But Mr. Morgan isn't saying that.

Rather, he's saying that so much growth and change is taking place in digital media that it's a great time to be in a start-up in that space. He lists the reasons:

• A big, growing market.
• Lots of "white space", i.e., unexploited niches.
• Room for geographic expansion.
• Lots of infrastructure in place
• Distracted incumbents
• Uncertain economy

If you want to read more, go to his blog -- http://blogs.mediapost.com/spin/?p=1234

The point is that entrepreneurial people and inventors tend to see the opportunities. That's what Mr. Morgan is seeing. You can too.

Please contact me with your questions or comments.

Do Start-Ups Need Plans?

On Tuesday, Jan. 9, 2007, the Wall Street Journal's "Enterprise" column asked, "Do Start-Ups Really Need Formal Business Plans?"

Some academics say - no - unless you are seeking venture or angel capital. Big plans of 50 pages aren't worth the time. It's better to execute. That said, a good summary and PowerPoint, plus detailed financial projections are all start-ups really need to raise money.

I would agree. I haven't written a full 30-page plan in years. But I do write excutive summaries for clients, and they have raised capital with the summaries and financial projections.

Just doing the summary makes you, the business owner, think through the elevator pitch and the business model. It makes you go out and get relevant data about the market. And doing financial projections lets you know how much money you need to raise in order to achieve success. It also tells you how fast you'll burn cash and when you'll break even. These are crucial pieces of information.

The planning process also helps some entrepreneurs realize that they really don't need outside funding. Or if they do, they could take on some debt, rather than giving away equity and ownership to investors. Several entrepreneurs I've worked with have discovered that organic growth -- plowing profits back into the business -- is the best way to grow.

Bottom line for me -- do plan -- do an excutive summary and financial projections. And get together an excellenet management team.

You can read the WSJ article at: http://www.startupjournal.com/