Transcript Zero to One Million: How to Build a Company to $1 Million

How to Build a Company
to $1 Million in Sales:
Before You Graduate
Presented By
Ryan P. M. Allis, CEO Broadwick Corp.
Author of Zero to One Million
October 29, 2005
CEO Conference Orlando
Speech Introduction
• What I’m Going to Talk About
• Personal Background
Personal Background
• An 11 year old on the west coast of Florida
helping seniors to use their computer for $5/hour
• A 14 year old with a growing web site design firm
• A 17 year old VP of Marketing of a company that
went from zero to one million dollars in sales
• A 19 year old published author and CEO of a
investor-backed software company
• A 21 year old CEO of a company doing $1.7
million in annual sales
Speech Introduction
• What I’m Going to Talk About
• Personal Background
• Business Background
Email Marketing Software
Web Marketing Consulting
www.broadwick.com
www.virante.com
Our Team
Ten Steps to Building a Company to $1 Million in Sales
1. Decide what to sell
2. Evaluate your Idea/product
3. Decide which type of company to form?
4. Raise funding, or… bootstrap and grow organically
5. Determine your market positioning strategy
6. Develop your marketing & sales strategy
7. Build your team
8. Become a good manager
9. Build strong systems
10. Scale the Model
STEP 1
Deciding What to Sell
Four methods for coming up with business ideas:
1. Continuously be aware of the products you use everyday. How can
they be better? What need or pain do you have that could be fulfilled by
a product or service that is not currently being provided?
2. Go to networking events, seminars, and conferences like this one. You
may find someone with a good product or a good idea that is looking for
partners.
3. Read magazines and publications that cover the industry you are
interested in.
4. Intern or get a job at a company in the industry you are interested in.
Work there to get experience and build contacts. Many times you will
see product ideas in the course of your work that your company will
choose not to pursue.
STEP 2
Product/IdeaEvaluation
Evaluation
Product/Idea
The key questions:
1. Does this product or service fulfill a real need?
2. Is the need that this product fulfills worth the price you plan to charge?
Other Questions to Ask:
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Does the product increase pleasure, increase utility, or reduce pain?
How valuable are the benefits the product gives to the customer?
Must the product be reordered?
Can a back-end for the product easily be developed?
Can it be obtained or produced for a low cost so as to support a high margin?
What is the current demand for the product?
Is this demand expanding?
How many other competitors are selling the same or similar product?
How many serious competitors are there?
What are the sales figures of these competitors?
How can the product be differentiated from competing products?
STEP 2
Product/Idea Evaluation
MAR Model for Opportunity Evaluation
MARKET
ADVANTAGES
RETURN
Need
Barriers to Entry
Investment Needed
Pricing
Cost Structure
Time to Breakeven
Market Structure
Intellectual Property
Expected Profitability
Market Size
The Team
Exit Strategy
Timing
Business Strategy
Expected Investment
Return
STEP 3
Which Type of Company?
Three Key Questions to Ask Yourself:
1. Will I need to raise funding?
2. Should I incorporate the business?
3. If so, which type of entity should I choose?
STEP 3
Should You Incorporate?
Incorporation has many benefits. The three most important are:
1. Reduction in personal liability
2. Tax advantages (pay taxes on net income not gross income)
3. Prospects, suppliers, and investors will think you’re for real
If you intend to take your business seriously, get incorporated.
STEP 3
What type of entity?
Ask an attorney for advice on whether you should form an LLC, S corporation, or C
corporation and what state to form it in.
Some rules of thumb based on my experience:
• An S corporation is good for a smaller business and has some tax advantages,
especially if you intend to be a lifestyle business.
• However, if you want to raise investment capital, be taken seriously by venture
capitalists, or ever sell your company, it will likely benefit you to be a C corporation.
• As far as location goes, Delaware is the most common state to incorporate a
business in if you plan on starting a business that will be seeking investment or
ever plans to go public or be acquired. If you plan on starting something smaller,
your home state is usually fine.
• If you are starting a company with just yourself and money is an issue, you may
wish to use an online service like incorporate.com. The cost is about $250.
• If you are starting a company with multiple founders or one in which you plan to
raise investment for, use a law firm. The cost is around $2500 but it will be worth it.
STEP 4
Raising Funding: Debt vs. Equity
The first step is to determine if you will need outside money to get your
business going. If you do, you have to determine how much is needed and
decide whether to seek debt financing or equity financing.
With debt financing, your company is loaned money that it will have to
pay back over time with interest. Main sources are family and friends,
your own contacts, and the bank. If you qualify, the SBA can be a big
help with loans.
With equity financing, your company is given money it will not have to
pay back in exchange for percentage ownership in your company.
Calculating ownership percentages:
Current value of company (Pre-Money Valuation) :
$40,000
Investment Amount:
$10,000
% You Own After Investment:
80%
% Investor Owns After Investment:
20%
STEP 4
Where to Get the Money
If you’re looking for…
If you’re looking for
$1,000 to $25,000
$25,000 to $250,000
$250,000 to $1 Million
$1 Million+
You’ll most likely get it from
Friends, family, your contacts, bank loans
Angel investors, bank in some cases
Group of angel investors
Venture capital firms
A Tip on Raising VC:
What’s the most important thing I can tell you about raising venture capital?
A. Don’t send in an unreferred plan!
STEP 4
Sections of a Business Plan
If you’re looking for any substantial amount of money, you’ll need a business plan. Here
are the sections that would be in a usual business plan:
• EXECUTIVE SUMMARY
• THE PRODUCT OR SERVICE
• BUSINESS STRATEGY
• USE OF FUNDS
• MARKET OVERVIEW
• MARKETING PLAN
• CHALLENGES & RISKS
• THE TEAM
• COMPANY PERFORMANCE TO DATE
• APPENDIX A – REVENUE, PROFIT, & BREAKEVEN PROJECTIONS
• APPENDIX B - MONTHLY BUDGET FOR NEXT 12 MONTHS
• APPENDIX C – QUARTERLY BUDGET 3 YEARS OUT
STEP 4
Bootstrapping & Growing Organically
It is certainly possible to create a successful company without any initial
investment other than time and energy. This is often the only option
available to young entrepreneurs. Here’s what you can expect if you go this
route.
1. Be prepared to work 60+ hour weeks for a year or more without any
salary.
2. Be prepared to wear multiple hats including CEO, CFO, COO, VP
Marketing, VP Business Development, and Chief Executive Janitor
3. Be prepared to offer ownership in your company (equity) to purchase the
intellectual property rights to the product you want to sell if needed.
4. Be prepared to offer ownership in your company to other team members
until you can pay them a market salary
5. Be able to look at creative ways at getting legal and accounting advisors
to provided discounted help including offering them a small piece of the
pie.
STEP 5
Market Positioning
To develop your marketing and positioning strategy, ask the following
questions:
1. What is my unique selling proposition? What will make my product so
different that customers will buy it rather than competing products?
2. What do I want my brand to stand for?
3. Do I want to have a low price, competitive price, or high price strategy?
Common methods of differentiation include a lower price, better service,
easier to use, a new feature, a new technology, or a better business
model.
STEP 6
Marketing & Sales Strategy
It doesn’t matter how good your product or service is if no one knows about it.
To get started on your marketing and sales plan, ask yourself these questions:
1. How will the product be sold? In a retail store, online, by direct mail, by
catalogs, by infomercials, through distributors, or by a combination?
2. Will you sell your product at wholesale, at retail, or both?
3. Is your main market businesses or consumers?
4. Where do customers go to look for the product?
5. How can we be positioned so that we’re in these places?
6. Could the price point support a telesales force?
7. Could the price point support a direct sales force?
STEP 6
Building a Web Positioning Strategy
Selling a product online can be a great way to reduce costs and
have your product exposed to a large market. Start by building your
web site, getting a merchant account, and getting a shopping cart or
order form running. In terms of positioning your company and
product online, there are four areas to look at
1. Search engine marketing
2. Email marketing
3. Affiliate marketing
4. CPC/CPM advertising
STEP 7
Building Your Team
Initially, it might just be you or you and a partner. As your company
grows, you’ll need to hire staff to help you. If you never hire anyone you’ll
be doing all the work yourself and be creating a job rather than a
business.
I look for three things when evaluating candidates:
• Experience in the related areas
• Communication skills
• Ability to take initiative
STEP 7
Broadwick’s Current Org Chart
STEP 8
Becoming a Manager
Once you have employees, you will have to learn how to manage them.
Here are some tips.
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Have a Vision and Communicate It.
Show Respect.
Share Your Success.
Don’t Be Too Serious.
Work With Your Employees.
Have Your Door Open.
Listen.
Build Relationships.
Commend More Than You Criticize.
Reward With Praise as Well as Salary.
STEP 9
Building Systems
Investors invest in systems. Just as a human body is made up of a number of different
systems, so is a healthy business. You will need to put in place systems in the following
areas:
• Human Resources
• Billing
• Marketing
• Product Development
• Employee Training
• Accounting
But what are systems? They are just formalized rules, policies, and procedures that
trained individuals are able to repeat time and time again as your company expands.
Key Question: Will your business be able to make money while you sleep? All highly
successful businesses do.
STEP 10
Scaling the Model
Once you’ve found a business and sales model that works, think about how
you can scale it. If you’ve been able to build your company to this point
without outside capital, now may be a good time to get some outside capital
and put your foot on the accelerator.
Ways to Scale:
1. Set up sales offices in other areas and expand the business in those
locations.
2. Either find partners or set up new offices overseas.
3. Considering franchising your business if applicable.
4. Bring on better talent that may have additional knowledge on how to
open up new routes to market.
5. Expand spending on advertising efforts that have shown to be effective.
Where’s the Exit?
If you’ve been able to create a successful company with paying customers, an
in-demand product, an experienced team, and solid systems you’ll be well on
the road to reaching the $1 million mark in sales. Although this is a worthy goal,
the end goal for many is an exit event which may take quite a few years longer
to reach.
A company can exit in just four ways:
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Get bought by the general public by having an initial public offering
•
Get bought by or merge with another company
•
Have an orderly shutdown in which all creditors & employees are paid
•
Go bankrupt
For many entrepreneurs with high potential businesses, being acquired or
going public is the end goal. It generally takes at least five years to reach this
point, although the time can be less in certain situations.
Principles for Entrepreneurial Success
1. Have a Bias Toward Action
2. Don’t Be Afraid of Failure or Mistakes
3. Work Your Butt Off, But Keep a Balance
4. Write Goals Down & Follow Up Monthly
5. Know Why You’re Doing It
Why I’m Doing It
Why Do I Do It? Five reasons:
1. I love the game.
2. I like being able to provide jobs.
3. I enjoy being part of a team that is creating a product used by over
3100 customers.
4. I like the concept of being financially free and the benefits that
come along with having money.
Reason 4
Why I’m Doing It
Why Do I Do It? Five reasons:
1. I love the game.
2. I like being able to provide jobs.
3. I enjoy being part of a team that is creating a product used by over
3100 customers.
4. I like the concept of being financially free and the benefits that
come along with having money.
5. I’m passionate about working toward reducing poverty in
developing nations and feel entrepreneurship is the best way I can
earn a lot of money so I can give back later.
What will be your motivation?
Some Final Words of Advice
1.
Being an entrepreneur is not for everybody. But if you find it for you,
and you can find a way to succeed, it is extremely rewarding.
2.
If you presently do not have the financial resources, the experience, or
a good business idea, intern at or get a job at a company in an
industry you are interested in and start building your network and
gaining experience.
3.
Always focus on building relationships and expanding your network.
Remember that it’s half what you know and half who you know.
4.
Don’t be afraid of failure or mistakes.
5.
Get out there and do it. Take the initiative and have a bias toward
action. Get experience however you can, have confidence, and be in it
to win.
6.
Write down your goals and frame them. Aim high. Follow-up monthly.
7.
Get started today.
For More Information
For more information visit…
Personal Web Site & Blog: www.ryanallis.com
Entrepreneurship Resource: www.zeromillion.com
My companies:
Broadwick – www.broadwick.com
Virante – www.virante.com
Recommended Books
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New Venture Creation by Jeffrey Timmons
Zero to IPO by David Smith
Rich Dad Poor Dad by Robert Kiyosaki
Rich Dad’s Guide to Investing by Robert Kiyosaki
The Tipping Point by Malcolm Gladwell
The Idea Virus by Seth Godin
The Anatomy of Buzz by Emanuel Rosen
Think and Grow Rich by Napoleon Hill
The Seven Habits of Highly Effective People by Stephen Covey
How to Win Friends & Influence People by Dale Carnegie
The Lexus and the Olive Tree by Thomas Freidman
Reinventing the Bazaar by John McMillan
The Commanding Heights by Daniel Yergin