Family, Friends and Funding: What You Need to Know
There’s a lot of talk about “early round” investors in startups, but the true “early round” honors usually go to founders, family and friends. If you include yourself in the “founder” leg of that triad, what do you need to know to get the other two legs – the friends and family – involved in the best way possible? You have some things going for you and perhaps against you when you start to approach those who know you best for money. In many ways, what will later be important to angel investors and venture capitalists, are also important to potential friends and family investors. First, they need to believe in you. Ultimately it is your ability, enthusiasm and commitment that they are putting their money in, so a self-check should be your first step before you approach your family and friends. Have skin in the game? Are you sufficiently convinced that you have put your own money into your project? If so, gauge your level of commitment. Is it at a mortgage-the-house level, or just a couple-of-months-worth-of-spending-money level? Also, be sure you and your spouse are equally committed and prepared for the journey you’re about to undertake. Second, you need to have a minimum viable product. “Ideas” are something you mull over. Viable products are things that can warrant investment. Don’t ask your family and friends for money if all you have is an idea. Too much time can be wasted and too much money burned between having an idea and having an actual product or service that people would be willing to pay for. If you are committed and have an MVP, you need a business plan. It may not be fully developed, but you must have a roadmap where you’re headed. It’s unfair to ask people to fund your journey if you don’t have a map; they will just be paying you to wander the desert. The business plan will give you the overview that you need to communicate to your friends and family. For example, are you just asking for seed money to get a “mom-and-pop” venture started that won’t do much more than provide your family with an income, or are you about to launch a business that has the potential to scale up? You need to understand where your business lies on that continuum. Loans or shares? When all these pieces are in place, you have an important decision to make: are you asking for loans or are you selling pieces of your company? This is the point when everyone involved needs to pivot from a personal relationship to a professional relationship. Whichever route you choose to take, it is a very wise idea to get a lawyer involved. For loans, be fully agreed on terms and if you are giving away ownership, be certain you know what that means for both today and tomorrow when you may seek additional investors. If you were to present your startup in front of a group of true venture capitalists, you would be armed with a presentation called a “pitch deck.” It’s a series of slides that covers these basic topics: Your company purpose The problem Your solution Why now Market size Product Team Business model Competition Financials With family and friends you may not have...
read moreBusiness and Career Killer: Dumb Use of a Smartphone
Here’s an interesting peek into our attitudes: A few years ago, a survey revealed that only 8 percent of cellphone users thought that their use had irritated other people. Yet in a rudeness study done by the Associated Press, 85 percent of those surveyed said they occasionally witness rude cellphone use. In other words, we think that there’s a whole lot of rude cellphone users, but it’s just not me! Can we be honest with each other and admit that there have been times when our cellphone use has been rude, distracting or inappropriate? We need to create some internal alarms and give ourselves the will power to control ourselves when they start to sound. With that said, let’s set some alarms. Your cellphone is on the table. Have you been in a meeting, taken your cellphone out of your pocket or purse and set it face up so you could see who was texting or calling you? It’s standard operating procedure for many. Don’t do it. First, you’re probably suffering from a mild case of thinking-you’re-important-itis. If you’re in a meeting, be 100 percent the meeting. Every time you pick up your phone or glance at its screen you’re belittling the others who are participating Your cellphone is peekable. Maybe even worse that having your phone on the table is tucking it away in a place where you can sneak peeks every so often. Come on! You know everyone sees those sly little glances. You aren’t fooling anyone. The rule is simple: Put it somewhere it won’t be a distraction. You’re yelling. Fully 63 percent of all cellphone users yell (warning: statistic made up, but it seems about right) when talking on their phones. Find out if that is your predilection and get the cure. And even if you do talk in a normal voice, there are many times when you should step away from others so you don’t become a distraction…or annoyance. Others are being noisy. Don’t call or try to carry on conversations when the ambient noise is a half decibel shy of a Pratt & Whitney jet engine. First, you and the party on the other end are likely to miscommunicate and second, you’ll have to yell so loud, others in your vicinity will be tempted to strangle you. You’re moving. “Planes, Trains and Automobiles” is a classic Steve Martin and John Candy movie, but they aren’t such great places to be conducting business over your cellphone. Even when you’re using your inside voice, if there are others around – including business associates – you’re going to be an annoyance. So far this has been a list of “DON’Ts.” However, there are a couple of things you should do to maintain good cellphone etiquette. Return calls and messages promptly. Don’t let voice mail or a text messages languish on your device. Nothing says, “I don’t care” as much as letting a text message go for hours before responding. Return a voice call with a voice call. People have their preferred styles of communicating. I know some kids who pretty much restrict all communications with their parents to text messages. However, there are many business professionals who prefer to hear your voice. Don’t relegate them to second-class citizenship by answering their voice mail message with a...
read moreThis Week in Small Business: Be heard on Capitol Hill, Market on a Shoestring and Improve your EQ
Politics, government and the economy Want to get a message straight to the lawmakers who have the greatest impact on US small business? Here’s the page on the House Small Business Committee website where you can tell your story and let them know what is causing you the greatest problems. Leadership, management and productivity Are you part of the sharing economy? If so, be sure you’re aren’t sharing too much with the IRS. Sometimes it seems that it’s all about data and analytics today. Managers and small business owners need to understand analytics via the Google-plus dashboard. You may be smarter than a fifth grader, but do you have more emotional intelligence than a high school cheerleader? Okay, unfair question. But EQ is crucial to your success as a leader. Bob Burg believes that empathy is the key differentiator between successful and less successful people. His guest article on the Living in Courage website gives you his reasoning. The future of work. Steven Melendez outlines how businesses are using surveys to help improve employee engagement. Marketing and sales Social media marketing is best when it’s personal and creating a powerful social media bio plays a major role in that. Here’s how to get your bio right. And once your bio is in place, here are another three ways to turn your small business brand into a social media juggernaut. Along with social media marketing, SEO is another low-to-no cost way to be seen and heard. If you need better local SEO, you’ll find a five-day game plan on this Convince and Convert blog. We’ve talked about social media marketing and SEO, it’s time to work public relations into the marketing mix. Operating on a shoestring? Boom Social founder Kim Garst gives you 20 inexpensive ways to market your small business. Here are 10 more newsletters every small business content marketer should subscribe to…assuming you’re already getting my weekly newsletter! (If not, you can sign up at the bottom this page and I’m also including a link to a free ebook right now!) Entrepreneurship, startups and innovation If you need a little startup, small business, or entrepreneurial inspiration, check out these small biz stories on the Constant Contact blog. Or maybe you need a little pep talk to get your entrepreneurial juices flowing. If so, you’ll love these 21 inspiring quotes…and hey, they also make great content to share in your social media accounts! Sign up for my weekly newsletter: First Name * Email...
read moreSmall Business and Entrepreneurship Council Hosts Twitter Chat: Small Biz Hill Update
Were you able to participate in our Twitter chat with House Small Business Committee Chairman Steve Chabot and Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council? If you participated or watched the chat session unfold, thank you. The more people we get involved in these, the more impact we’ll have. And if you weren’t able to be there, I will briefly mention some of the topics we touched on and give you some links so you can do additional research. Chairman Chabot outlined his priorities for this session of Congress: Improving access to capital, Increasing exports, Reducing over-regulation, and Reforming the tax code. Some bills are working their way through Congress that could have some impact on these issues for small business owners. Exactly, how big that impact would be is unknown. Here are some of the bills you might want to keep your eye on. H.R. 527: Small Business Regulatory Flexibility Improvements Act of 2015. The House has passed this bill sponsored by Chairman Chabot and it is awaiting action in the Senate. If signed into law, it would require regulators to better communicate the effect regulations would have on business and see if proposed regulations would have a disproportionate effect on small organizations, including small businesses. S. 226: The REINS Act (Regulations From the Executive in Need of Scrutiny Act of 2015). This would require Congress to approve all major regulations. If Congress fails to take action on a proposed regulation, the regulation would not go into effect. This bill, sponsored by Senator Rand Paul, is in committee. Kerrigan pointed out that the Affordable Care Act, aka Obamacare, has been changed more than 50 times since its passage and another change may be on the way. The bill defines companies with between 51 and 100 employees as “small businesses.” H.R. 1624 and S. 1099 give states the flexibility to define companies of this size as large businesses. The problem is that the number of health insurance companies working with small businesses is more limited than the number working with large firms. If enacted, this change should give these businesses more options when they shop for health insurance and this might help slow the rate of premium hikes. H.R. 1023: Small Business Investment Company Capital Act of 2015. This increases the amount of money the Small Business Administration is authorized to lend from $225 million to $350 million. The issue of trade also came up during the Twitter chat. Participants, including Kerrigan and Chairman Chabot, believe that the trade pacts Congress expects to see in the near future will benefit small business. Chairman Chabot pointed out that 95 percent of the world’s consumers live outside of the United States. Increased free trade should improve the ability of small business owners to sell to this market. However, lawmakers – and the public – will not get to see the actual language of the agreements until they are totally finalized, although negotiations have been underway for years. At that time lawmakers will be able to vote up or down on the entire packages. No amendments can be proposed. Chairman Chabot shared a great link with the Twitter chatters – https://smallbusiness.house.gov/forms/form/default.aspx?ID=1007. It’s a page on the House Small Business Committee’s website that lets you tell your small...
read moreHave Passion? Great, but don’t forget these key ingredients!
If passionate fans could win championships, the Chicago Cubs would be in the World Series almost every year. Here’s the truth: Passion by itself is little more than a flame that puts out light but no heat. This becomes a problem for many small business owners because they have been sold the lie “Do what you love, the money will follow.” That may be true, but just as often as not the money follows someone else. The only consolation here is that if these folks are going to go broke, at least they’ll go broke doing something they’re passionate about. I’m able to talk to a lot of small business owners as well as many who are planning to start their own businesses. This subject often comes up in conversation and I’m always quick to advise them that having a solid business plan and a willingness to put in a lot of hard work trump passion in the business world. Recently I ran across some data from a yet-unpublished study that bears this out and also illustrates a wide chasm between those with business experience and those without. The Harvard Business Review reported some preliminary findings of a study conducted by Utpal M. Dholakia, Michal Herzenstein, and Scott Sonenshein of Rice University. They looked at projects posted on Indiegogo and analyzed the promotional information posted with them. They were looking for words that indicated passion and words that indicated preparedness. They found that projects with passionate language were about three times more likely to hit their funding goals. (Lesson: passion sells.) However, when they looked more closely, they found that experienced investors weren’t swayed by the passionate language; experienced investors put their money on projects where there was a greater degree of preparedness expressed. Here’s the major take away: As a small business owner, or a person considering a startup, there’s a good chance you are going to be investing your own money on your project. Will you have the wisdom of the experienced Indiegogo investors and only put your money on a well prepared business, or will you allow emotion to lead you and risk it all on passion? Finally, don’t misunderstand me. I’m not saying that there is anything wrong with having passion about your business idea. In fact, passion can help you get through some of the tough times you’re bound to face as you grow your small business. I just want you to know that passion is no substitute for preparedness or hard work. By the way, I’ve just published a guide that outlines 10 essential building blocks for your small business. It touches on all the essentials required if you want to consider your business “well prepared” for success. If you overlook any of the 10 building blocks on this list, frustration and failure become a very likely outcome. It’s just a $2.99 Mac and PC download at Revizzit. (The reading software is free.)...
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