Tag Archives: timberry.com

Q&A: Who Do I Follow For Business Twitter

Q&A, Social media, Twitter, , , ,

(Note: This is my post from smbplans.com, where I posted it yesterday. I was asked to repost it here.) 

Here’s another good question I received from my Ask-me form on my Timberry.com website: 

If I’m trying to build my Twitter presence to support my [omitted] business, who should I follow? How do I find them? How to decide? 

I’m happy to answer that one because I think it could be useful to a lot of people starting to look at real-world business use of Twitter. Following in Twitter is important for several reasons:

  1. Who you follow determines what you see. Your Twitter stream is the collection of tweets from the accounts you follow. 
  2. Who you follow is who you are. Other people can see how you follow. That means they see what you like, believe in, care about, listen to, and so forth. c
  3. Who you follow is who’s likely to follow you back. For most businesses, following is the best way to be followed. About a third of your follows will follow you back — more if your tweets are interesting, less if they aren’t.   

So, with that as background, here’s who I think you should follow for your business twitter account, in order of strategy value:

  1. Leaders. The influencers you respect, want, and need. The people, businesses, and organizations you’d like to have knowing and liking and trusting you. It’s hard to generalize so think strategically for your specific business. For example, a restaurant would want local media, local organizations, hotels, food blogs, night out blogs, restaurant guides, travel guides, reviewers, and local people who comment on restaurants and have followings. The chamber of commerce, restaurant association, chefs’ schools, local university groups might be good targets too.
  2. Media, writers, bloggers, and experts in your field. Authors whose work you like and respect. People who you’d like to see writing about you. Our sample restaurant would look for food, dining, restaurant, travel media. 
  3. Social media stars who turn up in keyword searches. Search the web, search Twitter, using important keywords. The restaurant example might search for #dining, #gourmet, #organic, #vegetarian, #chefs, #fastfood, #slowfood, #meals, for example. And if it is located in Eugene, OR then it would search for #eugene and #oregon too. See who tweets with those hashtags. See what content they tweet. Decide whether you are compatible with them. 
  4. Local organizations, groups, and institutions. The schools, universities, community colleges, public theater, development groups. 
  5. Some general news and bloggers and information sources on idea, places, topics, and people that interest you. This is just because you want to see what they’re offering. They’re not strategic. 
  6. Friends, family, and compatible business associates. 

Sticky Questions on Startup Ownership and Buy-Sell

Advice, Business Ethics, Business Stories, Starting a Business, Valuation,

I received this interesting detailed question from the ask me form on my website. I’ve decided to answer it here. I think my answer might be useful for others with similar questions. I’m putting the question in quotes, paragraph by paragraph, and adding my response directly where it comes in the question. 

It starts like this:

A person ‘X’ owns 15% stake in a startup company – not by investing money but purely by virtue of having dedicating hours for building a product for the company. No salary was to be paid as per an initial agreement. The 15% stake was deduced by a simple calculation: (value of company) / (number of hours worked) x (dollars per hour).

Was it clear in the initial agreement that the formula here was to be used in future buy-sell transactions? Was that agreed to by all? 

The question continues: 

The value of company is therefore, sum of [(number of hours worked) x (dollars per hour)] and [hard cash invested by a person ‘Y’, also taking into consideration year-on-year appreciation of this hard cash]. Lets call that VC.

No, it’s not. The value of the company is what somebody pays for it when they buy it. And if nobody is buying it, then the value of the company is an estimated value. There are lots of formulas for estimating it, and estimates will vary widely. I’ve got more on that below, in my specific recommendations. 

However, it could be valued like you propose, for purposes of a buy-back transaction, if there was a buy-sell agreement that set that formula in the beginning. That’s if and only if. Issues like these are the reason experts recommend that partners and cofounders talk about the eventualities and agree, before the business starts, on how they’ll be handled. You have to agree beforehand or you’re stuck with arguing and negotiating the valuation afterwards. And when you try to pull it apart afterwards, without the benefit of an agreed-upono buy-sell formula, then many formulas might apply. 

And here’s the heart of the question: 

The company is not profitable yet. Person ‘X’ decides to give up his 15% stake of the company. My questions:

– How much is ‘X’ entitled to receive as the value for 15% stake? 
– Calculating backward, would X receive as much as [(number of hours worked) x (dollars per hour)]? 
– How does this change if the only buyers of the 15% stake are also two other stake-holders within this company, one of them by virtue of cash invested in the company, and the other by virtue of hours spent working for the company?

Normally, unless otherwise specified, owning 15 percent of a company means you own some shares that amounted to 15 percent of the total shares issued when they were issued. Ownership privileges are defined in company documents. You might have a seat on a board of directors, or not. You might get dividends when that’s relevant. And you’ll be able to sell those shares subject to securities and exchange regulations. 

Just hypothetically, as an example, say you agreed two years ago that you got 15% because you had put $15,000 worth of work on it for free and the founders agreed then that it was worth $100,000. If it’s launched and very successful now, with sales of $1 million annually, then it’s worth something like one or two times revenues, less a discount for debts, less a discount for not being liquid. In that case your 15% is worth something like $100,000. On the other hand, if it launched, has no sales, no profits, and has spent all its money, then your 15% is worth about zero. Companies are almost never worth a formula based on hours worked. 

So unless you have that buy-sell agreement stipulating the formula you’re using, then it doesn’t apply. Here’s what I recommend. 

  1. Agree on an estimated valuation. The formula you’re suggesting seems like it might be one-sided and self-serving. Good luck with it because it’s going to be hard. Expect disagreements. Depending on how much money is at stake and how severe the disagreement, you might need to work with an attorney and a valuation expert you can agree on. Here are some posts on this blog about valuation. This one is particularly relevant: 5 things business owners need to know about valuation. Sales, sales growth, profitability, and scalability and defensibility make it worth more. Debt, and not being liquid shares, low growth, and losses make it worth less. 
  2. Take 15% of that valuation and negotiate with your cofounders based on that value. I hope for your sake and the sake of your cofounders that things are going well for this business and they’re happy to buy you out. If they aren’t, then you’ll have to keep discounting until you get to an amount they’ll pay you. Or just keep your 15% of the shares, stop working for the company, and hope that someday they’ll be worth something. 

The moral of the story: please, the vast majority of business marriages (partnerships, startups with founders, etc.) end in divorce. Do a business pre-nuptial agreement, which is what they call a buy-sell agreement. 

 

 

Greatly appreciate your response and all your help!

Q&A: When to Quit the Day Job and Start On My Own

Entrepreneurship, Q&A, Starting a Business,

This Q&A post is different. Usually I highlight questions here for my answer, meaning I’m answering a question I think others are asking, for which I’m hoping my answer might be useful. In this case, however, I’m posting because of the question itself: It’s extremely common, very important, and doesn’t have any obvious single answer I can think of. 

This question came through my ask me form on timberry.com: 

I am at a crossroads in my working life. The company I am working for is going through retrenchments and no-ones job is secure. I have good experience in the industry and was aproached by a former employer who suggested that start my own business and sub contract to them. I do not have capital and because of the problems that the company I am working for have had my finicial situation is not looking good. I have always wanted my own small business and this seems a great opportunity except I am worried about the finances. My question is simply this: Do i take the risk and go on my own or find a another better paying job and sort out my finances at the risk of loosing this opportunity?

Your advice would be greatly appreciated.

My first reaction to this is not to answer out of respect for the importance of the question, and how little information I have.  Yes, this is one of the most important questions I get, and I get it a lot, although not often as well worded as this one. And in my case respecting the question means I’m afraid to answer it simply. It’s a life-changing decision and no thoughtful person should answer it from afar, with an email answer. 

My follow-on reaction is easy answers that are cliches: things like follow your gut that sound good but don’t really help. 

My best answer is you should do a business plan. Not a formal written business plan, a plan-as-you-go business plan, a simple practical plan that’s just big enough to reduce the uncertainty; that may never get printed; that may be as simple as a target market and business offering, key milestones, and projected sales, costs, expenses, and cash flow. 

The right kind of business planning is the best way to break the huge fear and doubt down into more manageable pieces. 

(Image: shutterstock.com)

Q & A: My Advice For Starting Your First Website

Q&A, Web/Tech, , , , , ,

I received this question yesterday from the ask-a-question form on my website at timberry.com:

I would like to create website design for my company. What do I need to do?

To start you could search in Google for how to create a website. The good news is that you’ll get good results. The bad news is how many: 89.1 million hits.

So I’m going to add one more? Yes, because you asked me too. And I have a step-by-step suggestion that takes work but not money, and not too much work. In my opinion. And with this you’re forewarned: there are millions of good answers. All of this is just my opinion.

  1. Go to WordPress.com* and sign up as a free user with a new blog. And don’t worry, I’m did understand the question – I’m recommending this as a way to make your first company website, not a blog. But WordPress calls it a blog, regardless; so I use that term here.
  2. Choose a unique name for your blog. Try your company name or something useful for marketing. The WordPress site will give you any unique name you choose followed by “wordpress.com.” For example, Sabrina Parson’s Mommy CEO blog is at mommyceo.wordpress.com.
  3. Choose a theme for your new blog.  WordPress will help you. There are thousands of themes, each of which gives you an already-designed format related to fonts, colors, placement of links and buttons, and so on.  For our purposes, make sure it’s a theme that shows buttons for pages. For an example, just look at the blog you’re reading. The buttons along the top of this blog are related to pages, not posts. Try them. See what I mean.
  4. Now do some pages: if you don’t feel competent writing about yourself or your company, find somebody else you trust to do it. You’ll probably start with an “About” page, and then maybe a general contact page showing your address, phone, and email addresses. You can get wordpress plugins to customize a contact form, but for now, list your email address in text with the @ written out as “at” so web crawlers won’t pick up your email address.
  5. Now, if you’ve followed these steps, you have a company website, having spent maybe two or three hours.

From here, in the now-immortal words of Buzz Lightyear, it’s “infinity and beyond.” You might want your own domain name (like my timberry.com, for example), and you’ll find ways to do that as a WordPress installation too. (timberry.com is hosted at MediaTemple for a little over $200 per year). You’ll be amazed at the variety of WordPress plugins for additional features and functions.

* WordPress is probably the most popular of the blog platforms, and it’s free if you do it like I’ve suggested. But there are many others, several with similar offerings regarded already-designed themes. I’ve also used Blogger (free) and Typepad (for an annual fee) and I like them both.

Disclaimer: Just in case you’re wondering: No, I have no relationship with WordPress, no commissions, no paid endorsements. I use it and I like it. This is free advice. Sad commentary, that these days a recommendation is suspect of ulterior motives. That happens so often that I don’t blame you for wondering.