Tag Archives: bplans.com

The Broken Spreadsheet That Birthed a Business Startup

Business Stories, Reflections, , , ,

I thoroughly enjoyed doing this Mixergy Interview, published this week, about how I bootstrapped Palo Alto Software from zero to about $10 million annual revenues:

Tim Berry on Mixergy
Tim Berry on Mixergy

It started one morning at 2 a.m., when I had to deliver a finished set of financials the next morning. It was 2 a.m. and I was tired and done with the financials but I had done something in either Lotus 1, 2, 3 or Excel because I use both. I don’t remember which one it was but I had done something to break the damn spreadsheet! If the financials are going to work, when you change the assumptions the balance still balances and the cash flow, and so on.

So it was 2 a.m. and I had broken the spreadsheet. I thought to myself, there is so much productizability in this. I have to be [building this out,] assumptions, inputs, outputs [and so on], so that this doesn’t happen again.

Mixergy is a collection of interviews with entrepreneurs. Andrew Warner, founder, does a great job interviewing, and collecting interviews. The goal is a collection of thoughts and stories about entrepreneurship. I’m proud to be included.

Andrew posts the complete transcript along with the interview, so it’s easier to browse. Here’s another snippet, about raising venture capital and buying them back:

But then, and this is what’s important for the story, you need compatibility with your investors. When the whole thing crashed in 2001, then we had completely different business models. Our investors needed us to have an exit, a liquidity event. Valuations were back down onto what they really were, you know, two and a half times revenues, for example, for a healthy software company.

But two and a half times revenues wasn’t enough money to make me and my wife and our family feel like we wanted to just sell the business. I had to be 10 or 20 times revenues. But, our VCs were trapped as minority investors. And they were trapped forever. I now have eight angel investments. I understand how bad it is to be trapped as a minority investor with no hope of a liquidity event. I don’t want investors, even as a minority, who aren’t happy with me or my company, so we negotiated. Their lead partner there told me later that not until the negotiations were done, “Tim, actually I can tell you now, you are our best investment for 1999.”

Andrew led me through a lot of stories: How I failed as a hippy, how we got started on the web, how we realized we needed downloadable software, how I changed my role seven years ago to open the field for a new management team, and others.  This led to a Business Startup.

Please Give Me A Step by Step Startup Map, Personalized, and Free Too!

Starting a Business, , , ,

There was a comment posted on this blog last week. It’s well-written and touches the heart. It also plays some chords I get to often, worth calling out in a blog post. It starts…

I’m a 40-something woman and I want to start my own business. I have a visionary mind and I’m very analytical (almost to a fault…). I have been working in [mid-level clerical jobs] for over 7 years now and I’m hitting a dead-end in the industry. Not to mention, I’m tired of the cube life. I have worked even booths at home-shows and fairs for virtually nothing and less. I have half a clue as to how to operate, but I have no idea how to get started.

… so of course I’d like to help. And then she adds…

Because of the down-turn in the economy and the job market, I have been working as a temp for the last 2 years and our home is way under water. As a result, I have no money – we live literally from week to week.

… which makes want even more to help. But then I get to this:

… the research I’ve done so far has revealed that I know nothing. I just discovered that if I get a food cart, it has to go through an approval application review at $130 hr w/ a minimum of 2 hours. None of the books I’ve read have mentioned this expenditure.

She goes on:

If it sounds like I’m asking for some hand-holding, well, yes I am. I want to do this so badly, but fear has always been my own self-defeating nemesis. All of that to ask you: Do you have a map? Any direction you can provide would be GREATLY appreciated! I don’t want to think I’ve covered the bases only to find out – oh, sorry, you screwed up. You now owe us big money. I can’t afford that. Anyway, I’m hoping you can offer something…

Do I have a map? Well, yes, sort of. Although, to be be honest, when she doesn’t have $260 for an approval, it’s hard to imagine any way she can actually build a real working business. That level of spending for approvals and licenses and such is really hard to avoid.  Isn’t the food cart itself going to take spending? And complaining about those books that didn’t mention it makes me nervous about giving advice. I’m thinking they probably waved a hand or two at licenses and approvals, because most people assume there will be some fees along the way. My own book 3 Weeks to Startup makes only general references to this kind of detail. It’s hard (probably impossible) to generalize with a book, to make it useful, and also include specifics to the level of detail of approvals required for a food cart in some specific location.

Still, I do have suggestions:

  1. Chris Guillebeau’s book The $100 Startup. It’s brilliant. And so well-written, in such delightful detail, that it actually makes the $100 number seem believable, although I still take it as more symbolic than specific. Chris is a gifted writer and he’s actually done what he’s recommending. And besides, a book with a chapter titled “Hustling: The Gentle Art of Self Promotion” that’s subtitled ‘Advertising is like sex: only losers pay for it’ deserves to succeed. Warning: it will cost you $15 or so.
  2. I’m disappointed getting a request for a map as a comment on a website that tries, and oh so hard, to be a map. You’re reading this at www.bplans.com. Her comment was on this blog, on www.bplans.com. I’m obviously biased but I still think this is the best place in the world for free start-you-business information. And I’d like to think that map is right here.
  3. Sabrina Parsons (@mommyceo) and I wrote the book 3 Weeks to Startup, published by Entrepreneur Press, in 2008. I like it a lot. It’s not nearly as much fun as Chris’ book, but it has a lot of good information. Unfortunately, it does, like the books you complain about, talk about licenses and permits without giving specific numbers. Warning: it will cost your $15 or so.
  4. Find your local SCORE chapter with the search at SCORE.org. Make an appointment and talk to one of the SCORE counselors.
  5. Do some Google searches for obvious search teams like “cheap startup” or “startup no money” and see what you get, but go very carefully with this one, because those waters are seething with sharks looking to take your money.

And a final thought: lots of people want the personalized step-by-step map, but building a business isn’t like that. Nobody but you can wade through the thousands of pages and flood of information available, sift and sort what works for you, and recreate a specific personalized guide. Everybody’s map is different. Thousands, maybe millions, of us have tried, in books and websites. But what you need is sorting and sifting and digesting it all, and then recreating a special customized personalized message for you, and that would take days, maybe weeks, of somebody else’s time. You have to do it yourself.

3 Essential Truths About Startups and Investment

Advice, Angel investment, Back to Fundamentals, Starting a Business, , , , ,

Today I’m answering, with this post, a lot of similar questions I get often in email, where somebody is asking me how to get connected to or hooked up with or recommended properly for angel investment. Here are some unpleasant and unpopular facts about startups and investment.

  1. Only friends and family believe in you and invest in you because you’re you. And that’s if your friends and family do believe in you; that’s not true for everybody. Outside investors, in sharp contrast to friends and family, either believe in your business prospects, your market, and your team, or they don’t invest. They’re doing it to make themselves money. (back story: I get a lot of emails from people asking how they can get investment for their business when they have pretty much nothing to offer investors. The answer is: You can’t.)  Or not at all.
  2. About that great idea you have that’s worth $5 billion for which you need $500 million to get started: unless you’re already a startup star, or an oil prince, or family wealth princess, just forget it. Mark Andreesen or Mark Cuban or Paul Allen could maybe get $500 million for a new idea. You can’t. (If it makes you feel better, neither can I). Give it up or scale it down to a $5 million idea that takes $5,000 to get started; or just forget it.
  3. All of you newbies – new to entrepreneurship, no successful startups, no traction — asking how you start your business with no money: Please, get real. Once in a blue moon a foundation or government agency will grant some money, and usually that’s just a low-interest loan, to some proposal that has social and economic value that fits government priorities. We see this in special development zones, some scientific or defense-related research areas, and occasionally with private money committed to social good. But it’s rare. If you aren’t one of those special cases, forget it. And if you are, do your homework, find out what really happens with grants and such.

If you’re still interested in a startup, stop looking for some pie-in-the-sky solution. Get a job in the business area that interests you, and learn the business. Partner up with people who’ve been there already. And do your homework, look up all those web pages full of good advice about startups, including this one, bplans.com, which is full of information about what you can and can’t do. If you’re in the U.S., connect with your local Small Business Development Center, or Women’s Business Center, or Small Business Administration (SBA) office. If not, find the equivalent in your country. Get some real info, and then do the work: do some research, develop a realistic plan, take real steps.

Starting a business isn’t a right. The government doesn’t owe you your startup. You have to make it happen. 

Planning Fundamentals 3: You Think in Profits, but You Live on Cash

Business Planning, Planning Fundamentals, , , ,

(Note: This is part 3 of my planning fundamentals review. Here are the links to Part 1: Form Follows Function and Part 2: All Business Plans are Wrong.)

Cash flow is the most important mystery you have to solve. Cash flow is the real heartbeat of business. And unfortunately, cash flow isn’t intuitive. It’s tricky.

We think in profits. It’s part of our culture. Take the sales and subtract the costs and expenses, and if the result is positive, then hooray, we’re okay.

Unfortunately, it doesn’t always work out that way. Because of  accounting rules, sales are sales we made for this month, and costs are what it cost us to produce what we sold this month, and expenses are what we incurred this month. But — and here’s the brutal mystery and trickery of it — we might have paid those costs and expenses months ago; and we might not get paid for those sales until months from now.

So we can easily be profitable and broke. Not intuitive, but it happens a lot. Most product businesses need to spend on building or buying the product, plus packaging, assembly, and distribution, long before they can sell it. And most business-to-business sales involve waiting months to get paid.

If we could only get the research to prove it, we’d find that a surprising percentage of businesses that go under are profitable when they do.

Managing the cash flow, planning on cash flow ups and downs, is one of the fundamental purposes of good business planning. You lay things out in order: how long you wait to get paid, how early you have to build, debt repayments and capital purchases that don’t show up in profit and loss. And good planning helps you anticipate problems in time to deal with them. Go to a bank with a good history and a plan showing cash flow hills and valleys, weeks or months in advance, and the bank loves you. Try it on Tuesday because you’re going to miss payroll on Friday, and you’re out of luck.

For a good visual on the mysteries of cash flow, go to the free cash flow calculator at bplans.com (shown in the illustration above) and use the sliders to watch what happens as you vary the wait to get paid and inventory assumptions, even without changing profitability. Watch how much faster the cash deficit grows when your sales grow fast and you don’t have an all-cash business.

You might also want to read my 10 critical rules for cash flow post. And just a could of weeks ago I saw a good collection of 6 Tips for Improving Your Cash Flow on the American Express OPEN Forum.

Business Pitch for Fun and Profit

Business Pitch, , , ,

(I just posted this on my Up And Running blog over at Entrepreneur.com. For the record, I rarely post the same thing in both places, but today, because I’m announcing this new pitch site, I’m making an exception.)

Consider yourself one of the first to know about the new Bplans.com pitch site at pitch.bplans.com. That means you can be one of the first to pitch and one of the first to get posted.

No, it’s not about putting your business in front of investors, although maybe it could be partly related to that. Instead, it’s about the art of the pitch. Free publicity perhaps too, and tips or comments. What it is about is the art of the pitch. Doing it right, doing it well, and getting yourself and your business up and showing up. (And let’s pause here to note that The Art of the Pitch is a chapter in Guy Kawasaki’s The Art of the Start book. Click here for his reading of that chapter.)

Take your browser to pitch.bplans.com and you’ll see the “Add pitch” button you can use to upload your pitch. What follows is a page of basic information (name, address, logo, etc.) and then a second page where you can add a YouTube video URL if you want, or short texts to deal with 10 key topics. 

This is all free to the users. What do you get out of it? A dedicated URL you can use to refer people to your business summary, plus the possibility of comments; this is free publicity, and publicity is assumed to be good. What do we get out of it? Bplans.com is about starting, growing, and planning a business, so we get more interesting stuff on our site.

And me? I like business pitches. That goes from the 60-second so-called elevator pitch to the 10-20 minute business pitch with slides. To me, business pitches, when well done, are fascinating. I see a lot of them. I see them in my role as a member of the Willamette Angel Conference, and I get to see them as a judge at venture competitions including Forbes and several business school contests. And I’ll be watching them on this site too.

Like they say in the commercials: do it today. Do it now. Click here.