Business Owners Toolbox Blog Discussions and articles to help the small business owner solve the challenges they face as they grow their business.

November 21, 2012

Crowdfunding for a business venture

Filed under: Finances — Tags: , , , , — Mike Van Horn @ 10:26 am

Q. Have you used crowdfunding sites to raise money for a business project. Asked on LinkedIn by Brandon Schaefer

I see potential problems with doing this. A business project is meant to make a profit, and earn a return for the investors. If the investors are crowdfunders, how do they ever benefit other than feeling good about supporting a business they like?

I see four ways to view such a contribution:

1. It’s a gift. I don’t expect to get it back. I’m giving it to you because I believe in what you’re doing.

2. It’s a loan, with no recourse. If you do well, I’d like my money back, with interest. If you go belly up, so be it.

3. It’s prepayment for services. I’ll put money into your business in the expectation that when you get going, you’ll provide me with product or services of comparable value. Perhaps a plaque with my name on one of your cafe tables.

4. It’s an equity investment. I expect to own a piece of your business, have a share of the profits as dividends, and to benefit on the upside if you sell it later at a premium. I want oversight on how you’re running the business.

If I’m a crowdfunder for you, several things would really irritate me, perhaps to the point of lawsuits:

1. You squander the money, just out of lousy planning and management

2. You divert the money to other uses, such as fancy offices or expensive travel

3. You make a bundle and ignore me. With my $1k investment (among others) you grow your company and Google buys you out, making you rich, then you won’t take my phone calls.

How are these potential situations handled on crowdfunding sites? What are the obligations of the person receiving the funds? What are the rights and recourse of the contributors? This is why we have contracts. The crowdfunding deals I’ve heard of sound kind of loosey goosey.  Fuzzy agreements now = lawsuits later.

If it’s for a good cause–say, you’re raising money to go plant trees to restore the rain forest–then I view my contribution as a gift, and expect nothing back.

But if I’m investing in a business that expects to make a profit, then I want some contractual accountability.

So when you look at Crowdfunding sites, see how they address all these questions and others

 

November 12, 2012

New Entrepreneurs’ Biggest Mistakes

Filed under: Entrepreneurship — Tags: , , , — Mike Van Horn @ 3:20 pm

Asked on MosaicHub by IcanNY

I see several big mistakes by entrepreneurs that can cut either way. Or even three ways:

1. Spending money before it is absolutely necessary–especially on overhead.
Or, on the other side . . . Failing to go all in, not spending as much as you need when the window of opportunity opens wide.

2. Plunging ahead too quickly before you are ready. Going to market with beta.
Or . . . Hesitating, waiting too long, so that others pass you by. Striving for perfection instead of good enough.
Or . . . Beating a dead horse. Sticking with something long after you should have written it off and moved on.

3. Being the Lone Ranger. Taking too much on yourself, thinking you’re the smartest, and that you know all the answers.
Or . . . Being indecisive. Listening to too many voices and viewpoints, trying to satisfy everybody.

4. Micromanager. Hiring good people but always looking over their shoulder, telling them how to do their job.
Or . . . Laissez faire. Hiring good people then turning them loose, giving too little guidance and feedback.
Or . . . Switching back and forth between these two. That REALLY drives your people crazy!

We all do these things. I’ve probably made every one of these mistakes! You can recover.

In my book, How to Grow Your Business without Driving Yourself Crazy, I show how to avoid these errors, and how to recover once you commit them.

 

November 6, 2012

How to Name Your New Company

Filed under: Entrepreneurship,Marketing — Tags: , , , — Mike Van Horn @ 12:55 pm

Asked on MosaicHub by Jackie G.

Here are 10 rules for naming your new company.

Don’t rush it. A bad company name is tougher to dump than a bad spouse!

Brainstorm to start with. Bring in a few savvy allies and start tossing out both sensible and crazy ideas. Write ‘em all down. The most outrageous suggestion might later spark the most practical name. Listen to yourself as you explain to people what you do, or when they then paraphrase what you do.

After you narrow down the candidate names, run them by people who might be your clients. If you get blank stares, scratch that one. If their eyes show recognition, you’re getting close. Listen for the one that clicks. I bought my company, and retained the (so-so) name, The Business Group. But my slogan, which is my top selling tool, just popped out of my mouth when I was explaining to someone what I do. (It’s “Grow Your Business without Driving Yourself Crazy®.”)

Try to find a name for which the URL is available. If not exactly, then very close. I failed at this, because my company name is too generic. But I got the “dot biz” version. (Your URL must be something you don’t have to spell for people. No hyphens, underscores, abbreviations, or cutesy made up words.)

Can your company name actually tell what you do and convey a benefit to the desired customer? If you can come up with one that does, use it. Even pay for it if you have to

Select a name in conjunction with clarifying your brand and designing your logo. Also choose your tagline or slogan this way.

What about clever made-up names? If people don’t get it instantly, it’s no good. The companies that successfully use made-up words for their name have a million dollar promo budget to drum it into the public consciousness. You don’t have that. For every Google and Xerox, there are dozens of failed names that just evoke a “Huh?” response from people

If you need to launch and don’t yet have a name that clicks, operate under your own name. Then when the right name pops out, register that as a DBA.

If you decide to use your own name, use your last name, not first. “Jackie’s Resume Service” sounds small; “Turner Executive Job Placement” sounds corporate.

If you use your name, is this a problem when you want to sell? Not necessarily. A client of mine just sold her company for $1 million, even though it had her last name. The buyer plans to retain the name.

There’s a trade-off between being too specific and too generic. You could be “The Turner Group,” which says nothing but allows you to diversify. “Turner Executive Placement” is specific, conveys a benefit, but could get in the way if you diversify.

But the less generic and more specific, the more likely you can register the corresponding URL. E.g., “turnerexecutiveplacement.com” may well be available.

November 5, 2012

Do you have what it takes to be an entrepreneur?

Filed under: Entrepreneurship — Tags: , , , — Mike Van Horn @ 3:35 pm

From LinkedIn question by Ayoola Stephen Efunkoya: “Do we all have what it takes to be entrepreneurs?”

It doesn’t matter if everyone has what it takes to be entrepreneurial. Enough do. Let them create jobs for the rest.

Do YOU have what it takes? That’s all that matters to you. Sounds like you already have several qualities needed by entrepreneurs. Here are the basic qualities. How would you rate yourself?

Profit drive. Do you have a strong drive to make a profit from your entrepreneurial efforts, in addition to serving others and getting satisfaction and pleasure?entrepreneurial vision

Market sense. Secondly, do you have a good sense of what you could sell that people would pay for–and pay enough so that you can make a profit and provide yourself with a good living?

Organizer. Third, are you good at organizing resources–ideas, capital, people, equipment, vendors–needed to build and manage an efficient and productive endeavor?

Visionary. Fourth, do you have a vision of how all this could unfold, and where you could take it? It’s okay to start out with a fuzzy vision–most of us do.

Risk taker. Fifth, are you willing to take a big risk, and go for it even when it’s all very uncertain?

Planner. Finally, can you pull all this together in a plan that you can follow and that others can understand?

If you can do these things, you can be an entrepreneur. You don’t have to be at 100% with all these; we all start out small and inadequate. But we go ahead anyway–because we WANT it.

Or maybe because we are forced into it, and have no option. Necessity is the mother of entrepreneurship!

One other thing. Not all entrepreneurs go into business. You can be entrepreneurial in a non-profit, in an educational or scientific or artistic organization, in an NGO. You can even be entrepreneurial working in a large corporation, if you pick your place carefully.

 

 

How to Generate Referral Business

Filed under: Marketing — Tags: , , , , , — Mike Van Horn @ 2:58 pm

Asked on LinkedIn by Shaun Caldwell

Referrals and introductions from clients are still our #1 source of new clients. Introductions from referral sources are much more likely to become clients than, say, cold calls. Here’s the approach we use. Just a few steps:

1. Provide excellent service to your clients so they will talk you up.

2. Ask them for referrals. Tell them who you want: “I want someone as good as you are, who has . . . . (list the desired qualities).” And ask for an introduction, not just a name and number, so that the prospect will expect your call.

3. Follow up! Don’t drop out these referrals and introductions. Sounds obvious, but this happens so often.

4. Let your client know the outcome. What happened with the person they introduced you to? New client? Not interested? Could never reach them? Doesn’t matter–just tell them.

5. Thank them. Doesn’t have to be monetary. I have tried both the reward and no-reward approaches. Most of my clients do not care about getting a money reward. But some do, and I give them a discount off their next month’s services with me. All of them get my profuse thanks!

6. GIVE referrals. The best reward for an excellent referral is giving one back. I notice that when people offer me money for a referral, I’m not interested. But I will drum up business for them if they give me good referrals in return!

So take the lead in giving referrals to those you’d like to get referrals from.

On the other hand, I have taken people off my list who are always asking for referrals but never give any back.

7. After a suitable time, ask for another referral.

8. All referral sources are not the same. Keep track of what quality referrals you get from different sources, and take particularly good care of your take referral sources. I’m talking dinner for two at the best local restaurant.

If someone makes a so-so referral to you, pass them along to a more appropriate person. Then thank your source and tell them what kind of referrals you can really help the most. You can convert a so-so source into an excellent source in this way.

Other kinds of referrals. What else do you want referrals to? I’m always looking for informal speaking gigs, so I ask people what small business organizations they know of that bring in speakers. All the above rules apply.

Marketing funnel for developing referral sources who aren’t already clients is shown in the diagram. Look for professionals who offer complementary services, are not competitors, and who work with the kind of people you want as clients. In my case, this includes CPAs and bookkeepers, IT consultants, web designers. Also people who work for small business support organizations.

Get testimonials. By the way, when asking for a referral, also ask for a testimonial statement, and be ready to record it right then when it is given. The first words out of their mouth will be the best. If you say, “Let me get some paper and write that down. Now, can you say that again?” They won’t be able to recreate it. Testimonials and referrals go together, since the person referred will first check your blog, website, and LinkedIn profile.

 

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