Transcript Small Business Administration

Starting Your Own Internet Business
A LoudOffice.com Workshop
Donald E. Chase, Partner
[email protected]
http://www.LoudOffice.com/Class/Business/
Step One: Understanding You and
Your Opportunity
Before Starting Any Business:
Are You an Entrepreneur?
 What is Your Idea?
 Who is Your Team?
 Who is Your Customer?
 How Do You Reach & Convert Them?
 Do You Have the Resources?
 Are You Ready?

Are You an Entrepreneur?
How do you define an entrepreneur?
 What qualities does an entrepreneur
have?
 What entrepreneurial qualities do you
have?
 What areas do you need to improve on?

Reality Check!?!
10 Questions You Must Ask Yourself:
1. Are You Passionate?
2. Are You Self-Confident?
3. Are You a High-Energy Person?
4. Are You Competitive?
5. Are You a Leader?
6. Are You Organized?
7. Are You a Good Communicator?
8. Are You a Risk Taker?
9. Do You Have Buy-In?
10. Are You Ready?
Your Idea

Where does your vision come
from?
– Your personal goals
– Your prior work experiences
– A problem you’ve solved
– Dumb luck
– An improvement of someone else’s idea

Take a few minutes to write a personal
vision statement.
Evaluating Your Idea
Can you clearly articulate your vision?
 Do you know the industry?
 What PROBLEM does your idea solve?
 Is your solution better?
 Can you protect your idea?
 Is your idea yours?
 Can you make money from your idea?

Your Team
Unless you are a “Jack
of All Trades”, chances
are your business
could probably benefit
by having a wellrounded team assist
you in your business.
Your Team (Cont.)

If you are going to look for financing,
most investors will want to see a solid,
experienced, and professional team in
place.

Some gaps are normal, but you should
never expect to get financing for a largescale business all on your own.
Understanding Your Market
Know Your Industry.
 Gather Data on Your Market.
 Talk to Prospective Customers.
 Research The Competition.
 Test Your Product.
 Determine Your Pricing Strategy.
 Is There a Niche You Can Fill?

Understanding Your Customer
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Who is your core customer?
What does your customer care about?
Can you solve a problem?
How is your customer addressing that problem
right now?
How do you solve that problem in a unique
way?
How big is the market for the problem you are
trying to solve?
How much are people willing to pay for it?
What Are Your Resources?
Prepare a personal financial statement.
 What assets do you currently have?
 Can you raise additional capital?

– The 3 Fs: Friends, Family, & Fools?
– Traditional Bank Financing?
– Investment Capital?

Other than cash, what resources do you
need and can you meet these?
– Materials, talent, intellect, etc.
Sizing Up The Opportunity
If you have a good balance, you should have an
attractive opportunity.
The
Resources
The
Idea
The
Team
Your Opportunity Checklist
1.
2.
3.
4.
Does the idea translate into a product
or service?
Is it a product that consumer’s want?
Can product attributes be
communicated so that customers know
they want it?
Can the product be developed today?
Opportunity Checklist (Cont.)
5.
6.
7.
8.
9.
Will the product be better or cheaper
than competitors?
Is the “window of opportunity”
opening?
Are you the right lead entrepreneur?
Do you have a strong team?
Do you have or can you get the
resources?
The Three Ms
Market Demand
– Customers are there.
Market Size & Structure
– There is a large enough market for you to
break into.
Margin Analysis
– You can be profitable.
Step Two: Business Basics
Choosing and Registering A Name

Unless you are doing business under
your own name, you will need a
business certificate which is normally
filed with your local city or town hall.

Corporations (and LLPs & LLCs) need to
file with the Secretary of State (One
Asburton Place, Boston).
Patents and Trade Names

You can check for
patents and
trademarks online.
 If your name is or
could be valuable,
you are well advised
to register a
trademark for your
name.
How to Structure Your Business

See Starting a Business in Mass. (pg 12)
– Sole Proprietorship
– Partnership
– A Corporation
• S Corporation (quasi-corporation)
• C Corporation (“normal” corporation)
– Limited Liability Company
– Limited Liability Partnership
State & Federal Taxes

If your business is a partnership,
corporation, or sole proprietorship with
employees, you will need a federal
identification number (Form SS4).

Mass. D.O.R. requires you to register if
you have employees or collect certain
fees or taxes (see page 21).
Employer Taxes

If you have employees, you will need to
be aware of the following taxes:
– Federal & State Income Tax
– Unemployment Insurance
– Workers’ Compensation
– Payroll Taxes
– Etc. Ad Nauseum

Massachusetts requires you to report all
employees w/i 30 days of hire.
The Importance of CASH FLOWS!

Cash flow is the
difference between the
movement of money
into and out of your
business over a period
of time.
 Even if you are making
money, you could have
negative cash flows.
 Without cash, your
business is dead.
Cash Flow Lingo

Cash Inflows
– Owner Investments
– Cash Sales
– Payments on
Receivables
– Interest Dividends
– Other

Cash Outflows
– Cash expenses
– Payments on
accounts
– Owner withdrawals
– Interest Payments
– Other
Starting Cash + Cash In – Cash Out = Ending Cash
How Much Cash Will You Need?

The total cash you need includes what
it’ll take to start the business, run the
business for 3 months, and keep you
from going hungry:
– Initial Setup Costs
– Business Operating Costs (90 Days)
– Personal Living Expenses (90 Days)

See “Estimating Cost of Startup”
Handout.
SHOW ME THE MONEY!!!!!!!!
How Much Financing the Inc. 500 Used:
Starting Capital
Less than $5,000
Less than $25,000
Less than $100,000
More than $1,000,000
% of the Inc. 500
25%
50%
75%
5%
Where to Get Financing
Personal Funds
 Personal Borrowing
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– Personal Loans, Mortgages & Credit Cards
Family & Friends
 Banks
 Small Business Administration
 Angel Investors & Venture Capitalists
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Bank Lending

Banks are a great
source of money if
you don’t need any.
 Banks don’t like risk.
 Banks rely on
collateralization.
 Banks cannot
collateralize
technology.
The Small Business Administration
Started in 1953 to provide government
loans and serve as an advocate for small
business concerns.
 The SBA does not make loans, it only
guarantees loans.
 Last year the SBA approved more than
$12 billion loans to more than 1 million
small business owners.

SBA Positives

Loan approval based on SBA Guarantee
 Faster- SBA has implemented three programs
to speed up transaction times
– Low Doc for loans less than $150,000
– SBA Express
– PreQualification Programs

Better Terms
– 5 to 10 years for Capital / 25 years for R.E.
– SBA caps interest rate that commercial bank can
charge
SBA Negatives

Collateral requirements are strict and personal
guarantees are expected in many cases
 Paperwork can be voluminous depending
upon the size and type of loan
 Double review requirements from local bank
followed by SBA adds to processing time on
certain loans
SBA Loan Programs

The 7(a) Loan Guaranty Program
– SBA's primary loan program.
– SBA reduces risk to lenders by
guaranteeing portion of loan.
– Enables lenders to provide financing to
small businesses when funding is otherwise
unavailable on reasonable terms.
SBA Programs (Cont.)

SBA LowDoc Program
– For loans up to $150,000
– Offers a simple, one-page SBA application form.
– SBA guarantees up to 80 percent of the loan
amount.
– Usually processed within two or three business
days.
– Business start-ups, as well as businesses with
average annual sales for the past three years not
exceeding $5 million and with 100 or fewer
employees, including affiliates, are eligible.
SBA Programs (Cont.)

7M-Microloan Program
– Micro-loans of $100 to $25,000.
– Provided directly by a network of intermediaries
approved by the SBA.
– Can be used for the purchase of machinery,
equipment, furniture, fixtures, inventory and
working capital.
– Most small businesses that are unable to obtain
funding through conventional sources or the other
SBA guaranteed loan programs should contact the
microloan lenders in their area.
Angel Investors

Angel Investors are
wealthy individuals
(often successful
entrepreneurs) who
like to invest in early
stage companies.
 Typical Angel
investments run
from $10K to $500K.
Venture Capital

Venture capitalists generally:
– Finance new and rapidly
growing companies;
– Purchase equity securities;
– Assist in the development of
new products or services;
– Add value to the company
through active participation;
– Take higher risks with the
expectation of higher rewards;
– Have a long-term orientation.
Watch Out!
Remember, for every one deal an Angel
or VC is successful with, another 3-5
FAIL.
 You will have to give up control and
ownership interest in order to attract
funding.
 There is such a thing as “Smart” money.

Writing a Business Plan
Business plans are a requirement if you
need to get any type of financing, but they
also serve as a great tool to help an
entrepreneur focus on what they want
their business to become, and how they
intend to get there.
Your Business Plan

Your business plan
is a road map that
shows you, your
employees, and
investors how you
will take your
business from Point
A ($0) to Point B
($1,000,000).
Why Write a Business Plan
1.
2.
3.
4.
5.
6.
7.
8.
To Sell Yourself on The Business
To Obtain Bank Financing
To Seek Investment Funding
To Arrange Strategic Alliances
To Obtain Large Contracts
To Attract Key Employees
To Complete Mergers and Acquisition
To Give Your Business a Focus
Types of Business Plans
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Summary Business Plans
– 10 pages or less, normally to attract bank
financing or provide some focus.
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Full Business Plan
– 10 – 40 pages, normally to attract
investment, alliance, or M&A.

Operational Business Plan
– 40 – 100+ pages, normally very detailed.
Business Plan Contents
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Table of Contents
Executive Summary
Description of
Company
Management
Product / Service
Market Analysis
Marketing Plan
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Competition
Operating Plan
Financial Plan
Risks
Benchmarks /
Milestones
Appendix
Preparing a Business Plan “Pitch”
1
Title;
Speaker Intro
How much you
need
5
More solution
details
9
Business Model;
Revenue Drivers
Cost Drivers
2
Company overview
and elevator pitch;
Mission Stmt.
6
3
Problem Buy-in;
Opportunity;
3Ms
7
Technologies
10
and products;
with benefits
8
Competition
11
Team
4 Your solution
Status;
Timeline;
Use of Funds
Entry Strategy;
Growth Strategy;
Mkting Strategy
12
Recap;
Call-to-action
Where to Go For Help

Mass. Small Business Development Center
Boston College
142 Beacon Street
Chestnut Hill, MA 02167
617-552-4091
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Small Business Administration
10 Causeway Street, 2nd FL Rm 265
Boston, MA 02222
617-565-5590
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SCORE (Service Core of Retired Executives)
617-565-5591
Mass. Office of Business
Development (MOBD)
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Mission is to assist in the creation and
preservation of jobs in Massachusetts.

Assists current and potential businesses in
areas such as financing, tax incentive, site
selection, and more.

Partners with local Small Business
Development Centers.
Finance and Tax Incentives
Bond Financing Program & Equipment
Financing Programs.
 Emerging Technology Fund.
 Export Finance Programs.
 Predevelopment Assistance Program.
 Capital Access Program.

How to Contact the MOBD
Online: http://www.state.ma.us/mobd/
 Address:
10 Park Plaza, Suite 3720
Boston, MA 02116
 Phone: (617) 973-8686
 Fax: (617) 973-8797
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Starting Out On the Right Foot
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Be mentally prepared to give it 100%.
Be prepared to sell yourself.
Be single-minded in getting your first
customers.
Keep your business model easy to
understand.
Don’t expect financial miracles on day one.
Be prepared for the unexpected.
Run Your Business Like a Business
Plan your efforts carefully.
 Focus on service first, flash last.
 Keep track of everything (in writing).
 Use credit wisely, extend credit more
wisely.
 Systematize all of your operations.
 Know your numbers.

Step Three: It’s eBusiness, Baby!
Some Perspective
Microsoft Corporation, 1978
Donald’s Golden Rule of eBusiness
Repeat After Me:
“eBusiness is Business”
“eBusiness is Business”
“eBusiness is Business”
The Internet is Just a Tool, It’s What You
Do With It That Makes it Special!!!
The Role of Technology in Business
Misconception - No
Value Created!!!
Technology
Business
Value
Drives
Yields
Creates
Business
Change
Directs
Strategy
New Business Models
Yesterday
Today
Business
Business
Technology
Technology
What are some of the changes you’ve seen?
What The Internet Does
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Creates eComm-only businesses
Dramatically improves service
Attracts new customers
Extends brand to new geographies
Changes the supply chain paradigm
Creates new channels
Creates new ways to buy
Creates new barriers to entry
It’s The Customer, STUPID!
It’s The Customer, STUPID!
1.
2.
3.
4.
5.
6.
7.
8.
9.
Target the right customers
Own the customer’s total experience
Streamline processes that impact them
Provide a 360-degree view of the customer
relationship
Let customers help themselves
Help customers do their jobs
Deliver personalized service
Foster community
LISTEN! LISTEN! LISTEN! LISTEN!
Marketing Your Business
Who Is Your Target Customer?
 What Do They Need?

– What Are Their “Real Needs”?
– What Are Their “Wants”?
– What Can We “Make” Them Want?
How Can You Identify And Find
Customers?
 How Can We Reach Your Customer?

Doing Business Online
Basics Of The Internet
 Online Business Models
 Website Design Basics:

– What Makes A Site “Nice”?
– How Can A Website Be Part Of An Overall
Marketing Effort?
– What Are The “Tools Of The Trade” And
How Do I Use Them?
Web Site Technology

Hosting A Site
 Adding A Database
 Security
– Cookies
– Blocking Directories
– Secure Socket Layers

Email
 eCommerce
Basics Of eCommerce

Finding The Right Name
 Building A User-Friendly
Website
 Putting A Store Online
 Accepting Payments
– Merchant Accounts
– Payment Processing

CRM
Getting People To Your Site

Search Engine
Traffic
 Linking
 Banner Advertising
– Paid
– Exchange

Off-Line Marketing
 Partnering Online
Consulting
Are You a Consultant?
Do you have industry experience that
you can share?
 Are you able to communicate your
knowledge?
 What other skills do you bring to the
table?
 What is your competitive advantage?
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Business Model Components
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Customer management
Use of community
“7-S” understanding
Business “Diamond”
Making money? Why or why
not?
Comparison of “bricks and
mortar” and
online parts of business
Competition (and their
models)
Business forces, daisy
chains, or whatever!
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Transitions from earlier
models
Current actions and plans for
the future
Technology
Mergers and acquisitions
Strategic alliances and
partnerships
Coping with legal/government
laws and regulations
Business Models - Simplified List

Transplanted business models
–
–
–
–
–
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Mail order retailer - amazon.com
Advertising model - yahoo.com
Subscriptions - wsj.com
Retail - netscape.com
Content distribution - MP3
Internet-native models
– Portals and CSPs
– Auctions (dynamic swaps, real time)
– Infomediaries
“7-S” Model
Structure
Systems
Strategy
Shared
Values
Style
Skills
Staff
SWOT Analysis Framework
Strengths
Weaknesses
?
Opportunities
Threats
Business Diamond
Management
Processes
Organization,
Skills and
Jobs
Business
Processes
Information
and
Information
Systems
Culture,
Beliefs
and
Norms
Porter’s Five Forces
Potential
Entrants
Bargaining
power of
suppliers
Threat of new
entrants
Industry Competitors
Suppliers
Buyers
Rivalry Among Existing
Organizations
Threat of substitute
products or services
Substitutes
Bargaining
power of
buyers
Step Four: Your Business
Key Questions
Why do you want to be in this business?
 Do you have clients? What did you do to
get them or how will you get them?
 Did you know why your customers
chose you?
 What is your primary mode of
marketing?

Making Money Online
Think of revenues as pillars that support
your business.
 How many different pillars is your
business built upon?

– Web Site Design
– Consulting
– Hosting

What would happen to your revenues if
you combined a wide array of pillars?
Principles For Super Success
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Consistently demonstrate a deep sense of
empathy.
Remember that your client is silently
begging to be lead.
Your customer wants a trusted advisor, not
a sales person.
Your #1 goal is to help your client focus.
Give your customers a backstage pass to
your business.
Principles For Super Success (cont.)
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Articulate your customers’ needs better
than they can.
Keep your customer at the center of
attention.
Meet and move your client on their pace.
Have a powerful vision to share with your
customer.
Help your customer uncover & solve
problems.
Principles For Super Success (cont.)
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Communicate with IMPACT or don’t
communicate at all.
Help your customer feel good about their
decisions and actions.
Your customer would rather lose money or
not make a decision then look or feel
foolish.
Your customer wants to be educated.
Principles For Super Success (cont.)

Always be externally focused.
 The customer cares about WIIFM
 Your customers need strategy and
solutions.
 Show your customers the before and after.
 Show your customer, don’t tell your
customer.
 Your customers WANT TO STAND OUT!
QUESTIONS AND ANSWERS