Entrepreneurship

02

Jan'17

Should I pursue a business idea that already exists?

“That which has been is that which will be, And that which has been done is that which will be done. So there is nothing new under the sun”  Ecclesiastes 1:9 So, your comment is stating what has been observed by mankind for centuries. Yet there are so many new things! Indeed, and they are all built upon small changes to things that already existed. A mighty oak tree is but a collection of small, un-noteworthy cells that combine in such a fashion as to create a beautiful monument to nature. So how about that idea of yours? How can it be different, better, What is your USP ( unique selling proposition)? It’s a good thing that there are already some competitors. That shows you that a market exists, that there is a demand out there for your idea. Now, how will you address that market that will bring customers to you? What will you do that will incrementally make your product/service better than what exists? Don’t be discouraged by competition. Be energized by it. Seek to be the better alternative for your target market. Figure out a way to communicate your USP and provide a better experience for your clients/customers. …

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02

Jan'17

Is a Delaware C-corp right for our start up? How many shares of stock should we issue and at what value? How many for co-founders?

So I am going to throw cold water on this whole idea. Why would you want to have a C-Corp for a start up? ( I know the answer you are all thinking: to get funding, the VC’s want a C Corp so they can take it public). STOP. So you are going to run your life by the Inc. Magazine playbook? Let’s reiterate what that “playbook” looks like: young energetic entrepreneurs start a company, they incorporate in Delaware, get VC funding, then take their company public and everybody rides into the sunset in their Teslas with megabucks. That is a stylized cartoon view of reality. It is promoted by the media and Inc Magazine in particular. It’s not what really happens in real life to most entrepreneurs. The narrative is a fairy tale. Consultants, lawyers and the like buy into this stylized narrative because it means they can fleece their clients for big bucks now and keep them dazzled by the golden rainbow ahead of them. STOP. First off, you need to think about taxes. A C-Corp is the worst structure for that. It locks up all the early losses in the Corp, with no flow through to the …

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25

Dec'16

How do I find a Good Sales Person?

Whoa! What all of us business / marketing types crave: a craftsman who loves to make things. OK. but you all be careful, y’all hear me? There are a lot of great builders who get burned big time. Ask anyone who was on the Windows development team, or the original Mac development team. If you are the engineer / builder, you must protect your skills and contributions. So, if you like building, and you are the one who is the driving force, then you are the owner. Now, you want to get some marketing talent. The problem is that marketing folks love to sell, and the first person they sell is you. For 50% of the firm, they will sell the hell out of it. STOP. First off, let me say I’ve started over a dozen businesses, taken two companies public, worked for many years as a CPA and adviser to many businesses, start up to middle market, to large public ( Aetna, Union Oil, etc type companies) My approach to management may be a bit German, but that’s my heritage, so it’s in the genes. There has to be a boss, and there have to be troops. Who is …

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23

Dec'16

How Can I get Someone to Invest in My Startup Idea?

Who or what company will invest in your idea for a start-up? Let’s be brutally honest here: at this point, only you. No one is going to invest hard earned, after tax dollars in something that is just an idea. You’ve got a lot of work to do before you can even think of getting someone to invest. You have to have “proof of concept.” You must demonstrate that your idea is practical, achievable, and economic. The first thing you need to do is develop a good business plan. Not one of those packaged deals you see advertised. You need a real business plan. See ceanow.org, where we have a couple of courses on how to develop a viable business plan. If it looks good, then shop it around to attorneys and CPAs and have them pick it apart. Revise, re-do. Take it to someone in a related industry, and have them criticize it. Prove you’re right. Once you’ve invested the time, energy and resources in developing a business plan, you can look for an angel. Friends, family, etc. You’ll only get a small amount from them. You will have to look to angel funding to get more. The problem is, …

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16

Dec'16

How do you get your idea from concept to a business?

This is the proverbial chicken before the egg question. How do I know my idea will work? Let’s skip to the bottom line: you won’t and can’t know for certain until you jump in the pool and do it. Anything else is just speculation. What you can do is test your idea. You don’t need to incorporate your company or do any fancy stuff to test your idea. Several ways come to mind: You can test market the idea. So you start really small, make up a few prototypes and see if you can sell them. If your idea is a service, start it in a test market and try it out. See if it catches on. You can “focus group” test the idea, by polling people about whether they are interested in it or would purchase it. Sorry to say, but this is very unreliable. It does give you some “negative assurance” because if your focus group hates the idea and no interest is shown, well, you probably have a dud. You can begin the market the idea taking orders for future delivery. In the software business, this is known as selling vaporware. You have the idea, but the …

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05

Dec'16

Calculating Cash Flow for a Start-Up

How do you calculate the cash flow for a start up company? It’s a guess. What you hope is that you can make an educated and reasonable guess. The best you can hope to do is figure out a reasonable model for what the cash flow should be.This involves understanding your market, how suspects are transformed to prospects and then into customers, and finally how the business converts sales into cash flow. You’ll need to come up with a detailed model which describes how you will identify suspects. Where are they, how many of them are there, and how will you communicate to them? How many of them are likely prospects? How will they be sold? How will you approach and sell them? What percentage of those you originally contact will end up being customers? What is the cost of customer acquisition? You’ll have to use comparable existing businesses to validate your numbers. You’ll have to do extensive research into the industry to understand this process. Just choosing some percentage off the wall won’t hack it. You must have a reasonable, logical progression from ground zero to warm bodies handing over cash. ( I had a client once who wanted …

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25

Sep'16

What are the Downsides of Buying a Turnkey Business

So you want to buy a business? My three words of advice are: be very careful. I mean, careful like in buying a used car, only more so. Here is a short list of the issues you may encounter: The reason given for the sale is rarely, if ever, the real reason. You need to know the real reason for the sale. The business, as represented is rarely, if ever the real state of the business. You need to know what it is you are buying. Are sales rising or falling, are margins going up or shrinking. Are competitors about to eat your lunch? The financials presented are rarely, if ever, truly representative of the operating results of the business. You need to see tax returns and you should have an accountant review them carefully. It may be a very valuable exercise to have the seller sign off on a Form 4506 to obtain a copy from the IRS. Remember, tax forms can be jimmied up pretty easily. The assets of the business are rarely, if ever, truly worth what the seller says they are. Inventories can be stale, nonexistent, or inflated. Physical assets can be old, needing replacement or …

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08

Sep'16

How Do You Prevent Employee Fraud and Theft?

How can you run a business while avoiding people from defrauding you? The answer is that you will at some point have someone steal from you. It happens to all business owners. It’s probably happening right now. The issue is how much.

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14

Aug'16

How do You Calculate the Value of Assets in Place?

By “assets in place” I assume you are meaning property, plant, and equipment, including inventory and land. In other words, how do you place a value on things which are in place being used in a business?

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12

Aug'16

What Happens When I Sell My Business?

There is no standard answer to this question. What typically happens is that the buyer and seller have a sales agreement that addresses what is being sold, how it will be transferred, and the responsibilities of each party before, during and after the sale is consummated. The agreement is the result of negotiations regarding the provisions of the agreement.

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