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Get Some Social Proof
Posted in: Blog, Startup, Uncategorized by jrobinson on April 26, 2011 | No Comments
So that idea is still nagging you? Feeling ready to start a business? Before you risk your time, security & savings, there are some things to do first.
Either many entrepreneurs are cocky, or cocky people become entrepreneurs. Sure, a degree of self-assurance is required to be successful. Where things go awry is when you become so caught up in an idea, just knowing it’s going to work, that you don’t stop to find or seek out some social proof. An untested idea is a shot in the dark. But knowing that people really need and will use your product is incredibly validating & the first step to a successful venture.
I strongly encourage everyone that has an idea to pursue it. Jump right in & see what happens. What’s important is that pursuing it the right way can protect you from spending your savings or cold-quitting your job before you’ve validated the idea. What you think you want to do may not be what customers need. By trying it out, getting feedback & applying it, you may end up pivoting and morphing into something else (whether related or unrelated), and that “something else” could be wildly profitable.
To illustrate, a recent New York Times article, “The Dark Side of Opening a Store“, shows the downfall of blind assurance, albeit from a brick-and-mortar perspective. Here is an excerpt:
“In 2004, Ms. Schmidt moved from New York to Colorado Springs, Colo., to join her future husband. She became fascinated with local history and culture, but she was disappointed when she had trouble finding cowboy boots in colors other than brown and black. She started to contemplate opening a store where she would sell a greater variety of boots along with other high-end women’s western wear…
During the 2006 holiday season, she introduced Girl of the Golden West as a pushcart in a Colorado Springs mall. Sales were dismal, but Ms. Schmidt attributed them to a mismatch between her high-end merchandise and the lower-income customers the mall served. So, she moved to temporary space in a more upscale mall. And when permanent space became available she seized it, paying monthly rent of about $2,500 plus a percentage of the store’s still anemic sales. Then she began approaching banks and learned the hard truth that they generally don’t lend to start-ups. Nor was the Small Business Administration, which guarantees loans made by banks, the source of financing she had imagined. She even sought venture capital.
Despite these setbacks, Ms. Schmidt, who describes herself as an optimist, was undeterred. She had $500,000 from the sale of her Manhattan apartment and decided to sink all of it into the store. About $300,000 of that went toward renovating the new space at the mall. Ms. Schmidt, who had five employees at most times, still wasn’t covering her rent…
In a final effort to breathe life into the business, Ms. Schmidt left the mall, relocating in a pedestrian-friendly strip in Manitou Springs, a historic mountain community. She no longer had to hand over a percentage of sales to a mall or staff the store during off hours. But it didn’t help enough, and she finally decided to close last summer.
She lost her entire investment, owes back taxes on the store and has filed for bankruptcy. “My credit rating is ruined, and if I weren’t married, I’d be homeless,” she said.”
How can you avoid this? Test your idea before going “all-in”.
If you’re a brick-and-mortar venture:
Survey your friends and friends of friends. Study the competition, both locally & regionally. Distribute some flyers with your phone # or email address on them. Track how many calls or emails you get & what people want to know. Most importantly, think of ways to minimize your initial investment. For example, if you want to start a furniture store, don’t sign a three-year lease in Birmingham’s SoHo or another top-dollar commercial district right away. Rent a booth at a local antique marketplace or attend regional shows first. Start building a loyal customer base – people who love what you do & are excited about it. Leverage these people to help you spread the word. Before long, if you get a real sense of other people’s excitement and passion – these are your future customers.
If you’re a tech startup:
Don’t sink $20,000+ into a website or mobile application before you’ve done your homework. In fact, you should be able to validate your idea, test market trends, and get some initial traction for as little as $300 + with some basic technical know-how. First, choose & buy your domain. Then, create a landing page. Reveal what your site or product does (or will do), that it’s in private beta testing, and offer an email signup field. Use WordPress if you’re not a savvy coder. Next, add Google analytics then sign up for a Google AdWords account. Create a handful of ads, choose 5-10 applicable keywords per ad, then monitor impressions & click conversions over the next few weeks. Spread the word on Twitter & Facebook to your own friends. Track site hits & email signups, then start a conversation with your subscribers. Don’t just send out “newsletters” – survey their opinions, such as which features they want, how they’d use it, if they’ll be willing to pay, etc. This should be your starting point & will either validate or invalidate your idea.
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This post was contributed by Jonathan Robinson, a young entrepreneur living and working in Birmingham. Jonathan’s companies include FreeTextbooks.com (founded 2009) and theClubhouseLeader.com (founded 2010).
Borrowing money to fund expansion
Posted in: Blog, Funding, Uncategorized by Brian Cauble on September 13, 2009 | 4 Comments
You have a few options if you need a decent, but not huge, amount of money. There are three main types that I can think of that would apply in this situation: Debt Financing, Equity Financing, and Commercial Finance.
Debt financing means taking out a loan. Not all loans are created equal and some will want you to put up your personal property, others will not. I would consider going to the Small Business Association. It is their mission to help people like yourself. Also check with any bank that you have a long standing relationship. They will definitely want to look at your business finances to determine if they think you will be able to pay them back.
Equity financing means taking an investor. When you need 50,000 to 500,000, Angel investors can be a good option. The key is they will be looking for a good return on their investment. So if your company is likely to grow slowly, I doubt they would be interested. The Birmingham Angel network is one place to look at.
Commercial finance means borrowing from a lender based on your business assets. If you have anything worth money in your business (real estate, equipment, stocks, A/R, etc), you can borrow against this. Porter capital is a local firm that does this. It is a loan, but only against your business assets.
I hope that helps you get the money you need. For what it is worth, I am discussing having Superior bank talk in November about this subject at a meeting.
“Making it Official”
Posted in: Uncategorized by Josh Andrews on July 13, 2009 | No Comments
Many entrepreneurs make money with their ideas before they ever “make it official” and form a company. If you ask ten different people when you should “make it official”, you will likely receive as many answers. Here is my take on when it is time to make “make it official”.
If you have an idea that makes money and requires no overhead and you will never have customers or clients coming on your property or who might be angry about something you (or someone who works with or for you) sell or do, you are probably okay to operate as a sole proprietor (or a partnership if there are two or more of you).
If, however, you will have property, employees, customers, vendors, independent contractors, or any other relationship outside of yourself to make your business venture succeed, you might want to consider “making it official” and forming a company separate from yourself.
All the available legal business entities do one thing for the owner: protect from liability. If you decide to “make it official” and form a company for your business venture you will be protected from claims by employees, independent contractors, vendors, actions taken by those in your employ, injuries incurred while on your property and contract liabilities. Essentially, when you create a company separate and apart from yourself, you have created a way to protect and limit your investment in your business.
It is important that all entrepreneurs wisely consider creating a shield to separate their personal assets from their business assets. It is the only way to ensure that the investment you choose to make in your business is the only investment you make. Without proper planning, you can unintentionally invest everything into your business because of one mistake.
That is not to say that when you create a company you are protected forever. You must be careful to maintain the appropriate company formalities, make sure your company has enough money to exist apart from you, the owner, and make sure that you keep all your personal activities and the activities of the company separate.
The reason for the formality requirements is to keep you, the owner, from inadvertently subjecting yourself to personal liability. For instance, you must always sign agreements for the company in your official capacity with the company. If you neglect this important formality, you could subject yourself to personal liability related to your personal signature on the document.
I would also encourage you to “make it official” with the advice and ongoing counsel of a qualified attorney. You don’t want to take shortcuts playing with your assets. If it is time for you to “make it official”, you want to do it right the first time.
Test post for technorati
Posted in: Uncategorized by Brian Cauble on May 27, 2009 | 12 Comments
Why is passion important?
Posted in: Blog, Uncategorized by Brian Cauble on April 23, 2009 | 1 Comment
If you have heard it once, you have heard it a 100 times. You need to be passionate about your business to be successful. Do you really? Why? I guess it depends on your definition of success. You and I both know plenty of people that run fairly successful businesses that don’t love what they do. Their business has good growth and seems to be doing fine. When you talk to them, you can tell that they don’t love what they do.
So what gives? I believe that you can create a business in something you aren’t passionate about and you can be successful, but let me tell you why passion is important.
Starting a business is really, really difficult. It takes your constant time and attention. It will push you to wonder about your abilities and you will work harder and longer than you ever have before. If you truly care about and believe in what you do, you will still get tired. You will still have stress. But it’s different. When you love what you do, it is so much easier to work that late night or weekend. You find yourself constantly thinking about how to improve your marketing, sales, products, and services. You feel satisfied about what your doing. As a matter of fact, you would do it for free. Making money at it just gives you more time to spend doing it. It just makes everything you do a little easier.
There is a second reason that it makes such a difference to be passionate. Have you ever heard of the 10,000 hour rule? It is discussed heavily in many books such as Malcolm Gladwell’s Outliers. The thought is that it takes 10,000 hours to become an expert in your field. This means it takes that many hours of pure programming to become an expert software developer. Since there are other things you do every day even when you are working, that is roughly seven years till you are an expert. Do you think that you will get to the expert level faster if you are passionate about what you do? Of course you will. If you don’t care for what you do, you spend as little time possible doing it so that you can do what you care about.
Finally, life is short. Spending your days doing something you care about is possible and achievable. You may have to spend quite a bit of time thinking about what you enjoy doing and how you can translate that into a business. It won’t be easy, but it is worth it. Millions of people do it. Everybody you read about or talk to that is extremely successful has figured out how to take their unique strengths and interests and turn it into their living.
You and I know both know in our heart that passion is important. Now you just have to believe that it is possible and worth it.
Creating entrepreneurship in Birmingham
Posted in: Blog, Uncategorized by Brian Cauble on March 30, 2009 | 2 Comments
Well, this is my first blog post so I guess I am officially joining the world of bloggers. Many of you know this, but we started a group called Birmingham Entrepreneur back in December of 2008. The goal was to promote and encourage entrepreneurship in Birmingham, AL in any way we can. While we are still young, we have already attracted the interest of many. We currently have 100+ people in our LinkedIn group. If you are at all interested in owning a business or currently own a small business, please consider joining us on LinkedIn.
What do we want to accomplish? Good question. We are still finding our path a bit, but like I said before, we want to promote startups in the area. I think we can accomplish this in several ways. First of all, we (the members) have to get to know each other. I firmly believe that we have to understand the passions, motivations, and skills of each other. In this way, we can find others with similar interests and passions and complimentary skills. Second, we can (and should) be resources to each other. If I need to know something about accounting for instance, I hope that someone can step up and point you in the right direction. I really hope that many people will want to help each other to see where it leads and because it is the right thing to do. Finally, why reinvent the wheel? There are many successful entrepreneurs in Birmingham and we should learn from them. I believe we can provide access to successful people who might be able to save you time and the pain of learning it the hard way.
So here’s to enjoying this journey together and creating something worthwhile for Birmingham.
Brian