Category Archives: Starting a Business

The General Rule In Startups Is That There Are No General Rules

Business Stories, Entrepreneurship, Starting a Business, , , ,

What’s the secret to success in entrepreneurship? Passion? Persistence? Doing what you like? Maybe it’s having a great business plan? I’ve written here that empathy might be the most important. But that’s a generalization too. What do you think?

Here’s the problem with that: there are no general rules. Scratch under the surface of entrepreneurship and you’ll find lots of people willing to put forth one characteristic or another. You can find examples for anything.

The people who strike off on their own are by definition people who split off from the group to do something different. So they don’t come in flocks, Generalizations don’t apply. I know people who fell in love with technology, a market, doing something they like to do, or even one or two who set out from the beginning with the specific goal of making millions of dollars. And I know people who started their own business mainly to be independent, set their own hours. I know people who did it just to prove that they were right when they said it could be done.

What reminded me of this was Susan Solivic’s What is Your Motivation? on Up and Running a few weeks ago. Writing about what makes people start companies, she suggests there are lots of different reasons.

Exactly. I agree.

(Image: Denny Onasta/Flickr CC)

Build Your New Business By Doing Your Old Job Better

Business Ideas, Starting a Business,

I know a bright, ambitious guy who didn’t have the patience to stay in school and ended up stocking retail store shelves for a major consumer products company. He stuck with that company, moved up from shelf stocking to sales, and the up again from there to sales management, and eventually, up to country manager for a subsidiary in another country.

And when he started his own business, what was it? Restocking retail shelves for consumer manufacturers. Right where he started. Only in his case, he was the owner, not the employee. He made a service of doing well what needed to be done. In just five years of it he had several thousand employees, and several very important major consumer manufacturers as clients. Before he was 10 years into, he sold the company for $10 million. He now lives happily in Switzerland.

That’s kind of my own story with business planning software. I was doing business planning for clients, and that led to developing templates for clients, which became a software product. That’s essentially the same thing: building a business based on doing what you’re already doing, but on your terms.

So that’s a thought for today: do your own business, not by doing something completely different, but by doing what you’re already doing, just better.

The Brand New SBA iPhone App is Released

Entrepreneurship, Starting a Business, Web/Tech, ,

I try not to talk about my company or its products too often on this blog, not because I’m not proud of both, but because a little bit of that goes a very long way.

Still, today, I’m proud to post here about the release of the Small Business Administration (SBA) new SBA iPhone app, shown here. It was developed by Palo Alto Software as a donation to the SBA, our way of trying to help small business. SBA Administrator Karen Mills called it…

… another example of the steps we are taking to do a better job of connecting entrepreneurs and small business owners with the tools to help them start or grow their businesses and create jobs.

(You can click on the image to go to the iTunes download page)

The mobile app will help users connect with SBA district office staff and SBA-affiliated counselors and mentors who can provide free, personalized small business assistance. The user-friendly format of the app will help answer questions such as: How do I start a business? Where can I go in my area to get free help with writing a business plan? And where do I begin finding funding for my business?

The SBA mobile app also features a built-in startup cost calculator to help estimate the costs associated with getting a business off the ground, plus an SBA partner locator to help users find SBA offices, Small Business Development Centers, Women’s Business Centers and SCORE.

We’ve been working with the SBA for more than 15 years, through three presidential administrations. One constant there is a lot of people working hard to promote small business through not just the well-known loan programs, but education, information, and a whole lot of problem solving in the front lines. The sba.gov website, with a clean new look introduced less than six months ago, is still the first line of information on small business in this country. And I’m personally very happy to say so.

Pam Slim’s 10 Keys to Startup Sanity

Advice, Starting a Business, Work Life Balance, ,

I was sorely disappointed to miss Pamela Slim’s keynote speech for the Willamette Angel Conference 10 days ago. I’m a member, but I had to be away, and had to miss it. I hear she was great. Eugene and Corvallis startups are still talking about it.

She called her talk 10 Keys to Maintain Your Sanity While Hustling Your Startup. Great title. Especially when you listen to it.

I was glad, though, to see Pam has posted it for all as a slide show with her audio. If you’re involved with a startup, or thinking about it, give yourself the luxury of Pam’s real-world advice.

10 Keys to Maintain Your Sanity While Hustling Your Startup

Thanks Pam.

Startups Beware: Patents are Like Umbrellas. False Confidence.

Advice, Business Stories, Intellectual Property, Starting a Business, , , , ,

For startups, patents are nice to have, but not if you trust them to really protect you. In that they’re like umbrellas. Good protection in a drizzle. False confidence in a downpour.

I write that because I’ve read about 50 real startup business plans in the last two months, and I’ve gone through at least two dozen pitch presentations, and I think it needs to be said. patent pending

Patents are usually better than nothing. I like it when a startup has a patent portfolio already issued, but also promises to keep trade secrets very tight and has a budget for patent defense. I like it more when they have a letter from a patent attorney talking about coverage and defensibility of the patents.

I hate it when the startup says a patent has been applied for, or there is a provisional patent, and says (or implies) that therefore their business is defensible.

Having a patent doesn’t mean much anymore. A provisional patent, less. And having applied for a patent, even less. The world of high tech is littered with fallen companies that were smashed to bits by a large company getting around, or violating, their patents. It happens all the time.

Sometimes I feel better with a strong trade secrets policy, a fast ramp-up, and great marketing, which I think offer the best real protection against copycats.

I suspect that the patent system is broken. Some bad patents that should never have been issued feed the coffers of patent trolls. And good patents are hard to find, slow to get, and hard to enforce. Sure, they’re good to have. But don’t trust ’em.

(Hat Tip to Twitter simile contributors @pierzy, Joel Libava (@FranchiseKing), and Dan Ness)

(Image credit: istockphoto.com)

Are You Planning to Sell Boxes or Hours?

Angel investment, Bootstrapping, Starting a Business, Venture Capital, , ,

All of these are just “in general” points. There will always be exceptions. But still, it’s good to understand the huge difference between service businesses and product business. Selling hours has advantages, but selling boxes does too. And there are huge differences, things I think you need to understand.

My wife and I spent several years working on converting our business planning business to “sell boxes, not hours.” It took a long time, but eventually that worked. But we started with a service business, and it was only after several years of that business that we started to convert it to products. Here are some of the standard tradeoffs.

  1. Service businesses take less capital to start. Particularly professional service businesses, like consulting, graphic design, landscaping, bookkeeping … you don’t have to buy products to sell, or materials to build products. You need credentials, yes, and a computer, and in most cases a website. But you’re not worried about design, prototypes, packaging, inventory, channels of distribution, and all that.
  2. Service businesses are harder to grow. With a product business you sell more and you make more money. Succeed with online marketing, open up a new channel, and you can build more of those things. Product businesses usually – obviously not if a lot of hand labor is involved – scale up. On a classic service business, though, to double sales you have to double your payroll. That’s what investors call a “body shop.” Classic service businesses can be great businesses for the owners and workers, but they’re rarely good investment opportunities for outside investors.
  3. Investors like Product businesses. I’ve been spending a lot of time lately looking at pitches for our angel investment group, and evaluating businesses for some major business plan competitions. Investors like product businesses because you can lever up, and scale. And you can sell a product business – the whole business – to somebody else. And you can make sales while you sleep. And of course, to make this perfectly clear …
  4. Investors don’t like service businesses. It’s the body shop problem. The assets walk out of the door every night. The assumption is that they don’t scale. Sure, there are exceptions.
  5. Web service businesses act like product businesses, without the inventory drag on cash, or the problems of physical distribution. A web service can scale up, if it’s designed correctly, and go from 100 to 1,000 to 10,000 without needing a lot of hand labor or human intervention.

So what? I think it’s good to know. Service businesses start up all the time with only a few thousand dollars of initial investment. All you need is that first good client, and off you go. There is less risk. It’s easier to get from nowhere to covering costs.

But if you want to go big-time, or if you want to build a business you can sell, build products or web-based services.  Sell boxes, not hours (or a web app).

(Image: Quang Ho/Shutterstock)

Want to Really Win Big? Blow Up a Market

Business Ideas, Starting a Business, , , , , ,

People ask me often what kind of business to start. Usually I say something like “look in the mirror,” continuing with how the best business for you has to reflect who you are and how you’re different. But here’s a new thought for you: choose the market you’re going to disrupt.

This isn’t for the sandwich shop, graphic arts business, dry cleaner, or new restaurant. It’s for the rarified air of the big bang startup. What market doesn’t work? What market can you radically change?

If your new business blows up an old market, then you really matter. Think of Netflix, amazon.com, Google, Hulu.com, and other big winners. ZipCar. Expedia. Twitter. Facebook.

In every one of those cases, somebody applied a new way of thinking to an annoying old way of doing something.

I heard it yesterday from one of the smartest and most successful people I know, my son Paul, CTO of Huffington Media Group:

“I’ve seen the way smart investors work. If it’s a team they believe in, and they focus on a market to disrupt, it’s going to work. They’re going to get going, change it often, and make it work.”

Want to really win big? Blow up a market.

Is Search-Driven Entrepreneurship Obsolete?

Entrepreneurship, Starting a Business, Technology, Web/Tech, , , , , , , , , ,

Remember that dream we all had together, not so long ago, where a well-thought-out startup with a good understanding of the Web could grow on merit alone? Isn’t that sort of what Google did? And many others? I fear that’s not happening anymore.

For a good, short summary of the SEO problem, from a brilliant software entrepreneur, watch the two-minute video here: Joel Spolsky on how SEO makes the Internet worse.

http://player.ooyala.com/player.js?deepLinkEmbedCode=BlaTliMjqwMuRdNqnfz02YdQp1z_hzDb&width=490&embedCode=BlaTliMjqwMuRdNqnfz02YdQp1z_hzDb&height=275

I’m not an SEO expert, but how telling that Vivek Wadwha posted Why We Desperately Need a New (and Better) Google on exactly Jan. 1, 2011.

The problem is that content on the Internet is growing exponentially and the vast majority of this content is spam. This is created by unscrupulous companies that know how to manipulate Google’s page-ranking systems to get their websites listed at the top of your search results … Content creation is big business, and there are big players involved. For example, Associated Content, which produces 10,000 new articles per month, was purchased by Yahoo! for $100 million, in 2010. Demand Media has 8,000 writers who produce 180,000 new articles each month … This content is what ends up as the landfill in the garbage websites that you find all over the Web. And these are the first links that show up in your Google search results

Don’t think for a minute that Google isn’t working on it. In another January post, Google search quality czar Matt Cutts wrote a blog post promising a major effort to revise Google search to deal better with spam. And that’s been happening. Google is in fact shaking things up, which is good news for the long term, but, well, Google is shaking things up. The Los Angeles Times’ reported recently…

Google won plaudits for promoting original research and analysis and banishing pages littered with second-rate content or overloaded with advertising. But the revision to its secret mathematical formula that determines the best answers to a searcher’s query also caused an uproar as hundreds of sites complained to Google that they had been unfairly lumped in with “content farms,” which churn out articles with little useful information to drive more traffic to their sites.

Chris Dixon, co-founder of Hunch.com and startup celebrity, recently posted SEO is no longer a viable marketing strategy for startups on his blog. Here’s his conclusion:

Google seems to be doing everything it can to improve its algorithms so that the best content rises to the top (the recent “panda” update seems to be a step forward). But there are many billions of dollars and tens of thousands of people working to game SEO. And for now, at least, high-quality content seems to be losing. Until that changes, startups – who generally have small teams, small budgets, and the scruples to avoid black-hat tactics – should no longer consider SEO a viable marketing strategy.

Tim Cohn posted The SEO is Dead Debate the following day. He doesn’t reference Chris Dixon specifically, but he has an eloquently short post, saying that SEO isn’t dead because ….

… the SEO is Dead author never offers an equal let alone superior alternative.

That one bothers me. Since when does nothing die without offering a superior alternative?

What do you think? Is SEO dead to startups?

Case Study: Vizme, Adaptation, and Living with Facebook

Angel investment, Business Stories, Starting a Business, True Stories,

I’ve been watching vizme.com since I first saw the demo about a year ago. It struck me as immediate coolness. Imagine being able to mix up a combination of online video and pictures that play when clicked, representing a topic, theme, idea, or brand; and putting that onto your blog or Facebook page as something like an icon (it’s actually bigger than an icon, but circular, as shown here) that plays when clicked.

To give you an idea, I went over to vizme.com and picked up a token for sharing. If you click the image here, a vizme token, it should take you to some person’s creative work patching together SuperBowl commercials from YouTube. In this case, it’s a lot like a YouTube playlist, but it’s a dark background and a much more direct, less cluttered, interface. I could share it on Facebook, Twitter, or, like here, on a website. And it’s free.

I’m interested in Vizme for several reasons: It’s in Eugene, OR, so it’s local to me. It entered the Willamette Angel Conference investment contest last year, and I’m a member there, so I got to watch the pitch. It didn’t win, but it did get my vote on the first ballot. I like Dan Mayhew, one of the three founders. I think it’s a cool idea, well implemented.

vizme logoPerhaps most important, though, is the principle of adaptation. While I’ve been watching, the vizme founders have gone up and down in sophistication of the interface as they went through early users and had to make changes. They’ve had to adapt to changes in the Facebook interface that (entirely by accident, without any bad intentions on Facebook’s part) changed the way the tokens work. And they’ve been scrambling for angel investment, testimonials, advisors, and interface adaptations to fit the changing face of social media. And their revenue model has been revised and adapted several times.

And, as a great example of what happens in the startup world, life goes on. Facebook changes, vizme adapts. Users work with it, suggest changes, and vizme adapts. Those changes affect the revenue model, and vizme adapts.

For a second opinion on that, you might read Will Vizme Revolutionize The Way We Share Content? over at FastGush.

Help With Naming: Am I Green or Not?

Business Stories, Starting a Business, , , , ,

I’m not sure of the answer to this one; it’s a good question. A man whose last name is Green saw my post here turning green from overuse and he asks:

I’m starting a small woodworking and furniture building shop and am looking for a name. It seems natural to use Green as it is my last name, however I don’t want to be lumped into just another green company.

My immediate reaction was:

Of course you should use your own name. It’s not just greening it up in your case, it’s authentic; it is your name. And if it resonates because it also implies natural and environmental, all the better. Overuse or not, those are both good qualities.

But then I thought some more about it. What if potential customers see Green in the name and assume greenwashing?What if, as time passes, green acquires negative meaning, becomes a diluted term like the term user-friendly in software?

So I asked some friends in Twitter, and got some good answers very fast. You can see those answers here, and, by the way, that link in one of the tweets goes to Smart Industries, which was founded by Gordon Smart in 1963, and is strong and healthy.

So – and this is what makes this a good question – there is no easy and obvious answer to this one. Like so many things in business, it depends.

By the way, those smart and helpful people who answered in Twitter, should you want to follow them, are @rieva (Rieva Lesonsky), @smallbizlady (Melinda Emerson), @timburks (Tim Burks), and @frankdekker (Frank Dekker). Thanks.