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Archive for June, 2010
Monday, June 28th, 2010
Let’s take a look at the basic financial statements that every business owner should prepare and review on a regular basis: the profit-and-loss statement, the balance sheet and the cash flow statement.
Profit-and-loss statement.
This is a historical record (also known as an income statement) that shows how much you’ve made in revenues, how much you’ve spent and what your net income is over a specific period of time. The time period could be a week, a month, a quarter or a year, although monthly is the most common. The P&L tells you whether or not you’re making money, and how much you’re either making or losing. A further benefit: if structured properly, the P&L can show you which products or services are selling the best and where you are spending too much on expenses ranging from office personnel to advertising.
Balance sheet.
This is a snapshot of your company’s financial health, providing a summary of your company’s assets, liabilities and net worth. In other words, the balance sheet (sometimes called the statement of financial condition) tells you what you own and what you owe. Your assets will be the resources that your business controls: cash, equipment, buildings, furniture and money owed to you. Your liabilities will be the debts or other obligations that you owe others, such as accounts payable, taxes, loans and payroll. Your net worth (also known as equity) is what’s left over— or assets minus liabilities.
Cash flow statement.
This captures how cash has flowed in and out of your company over a specific period of time. Think of it like the ledger of your personal checkbook, which shows money coming in, money going out and the remaining balance. The cash flow statement is a very important financial statement because even though your P&L may be showing a profit, the business may not be generating cash. And the reverse is also true. For instance, your sales may be growing as billings increase to new customers, but your new customers may be slow to pay, she says. At the same time, you might be spending more on inventory in anticipation of growth. The cash flow statement will show how all those changes affect your cash position.
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Friday, June 18th, 2010
Quotes from Steve Jobs:
1. “Innovation distinguishes between a leader and a follower.”
Innovation has no limits. The only limit is your imagination. It’s time for you to begin thinking out of the box. If you are involved in a growing industry, think of ways to become more efficient; more customer friendly; and easier to do business with. If you are involved in a shrinking industry – get out of it quick and change before you become obsolete; out of work; or out of business. And remember that procrastination is not an option here. Start innovating now!
2. “Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.”
There is no shortcut to excellence. You will have to make the commitment to make excellence your priority. Use your talents, abilities, and skills in the best way possible and get ahead of others by giving that little extra. Live by a higher standard and pay attention to the details that really do make the difference. Excellence is not difficult – simply decide right now to give it your best shot – and you will be amazed with what life gives you back.
3. “The only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it.”
I’ve got it down to four words: “Do what you love.” Seek out an occupation that gives you a sense of meaning, direction and satisfaction in life. Having a sense of purpose and striving towards goals gives life meaning, direction and satisfaction. It not only contributes to health and longevity, but also makes you feel better in difficult times. Do you jump out of bed on Monday mornings and look forward to the work week? If the answer is ‘no’ keep looking, you’ll know when you find it.
4. “You know, we don’t grow most of the food we eat. We wear clothes other people make. We speak a language that other people developed. We use a mathematics that other people evolved… I mean, we’re constantly taking things. It’s a wonderful, ecstatic feeling to create something that puts it back in the pool of human experience and knowledge.”
Live in a way that is ethically responsible. Try to make a difference in this world and contribute to the higher good. You’ll find it gives more meaning to your life and it’s a great antidote to boredom. There is always so much to be done. And talk to others about what you are doing. Don’t preach or be self-righteous, or fanatical about it, that just puts people off, but at the same time, don’t be shy about setting an example, and use opportunities that arise to let others know what you are doing.
5. “There’s a phrase in Buddhism, ‘Beginner’s mind.’ It’s wonderful to have a beginner’s mind.”
It is the kind of mind that can see things as they are, which step by step and in a flash can realize the original nature of everything. Beginner’s mind is Zen practice in action. It is the mind that is innocent of preconceptions and expectations, judgments and prejudices. Think of beginner’s mind as the mind that faces life like a small child, full of curiosity and wonder and amazement.
6. “We think basically you watch television to turn your brain off, and you work on your computer when you want to turn your brain on.”
Reams of academic studies over the decades have amply confirmed television’s pernicious mental and moral influences. And most TV watchers know that their habit is mind-numbing and wasteful, but still spend most of their time in front of that box. So turn your TV off and save some brain cells. But be cautious, you can turn your brain off by using a computer also. Try and have an intelligent conversation with someone who plays first person shooters for 8 hours a day. Or auto race games, or role-playing games.
7. “I’m the only person I know that’s lost a quarter of a billion dollars in one year…. It’s very character-building.”
Don’t equate making mistakes with being a mistake. There is no such thing as a successful person who has not failed or made mistakes, there are successful people who made mistakes and changed their lives or performance in response to them, and so got it right the next time. They viewed mistakes as warnings rather than signs of hopeless inadequacy. Never making a mistake means never living life to the full.
8. “I would trade all of my technology for an afternoon with Socrates.”
Over the last decade, numerous books featuring lessons from historical figures have appeared on the shelves of bookstores around the world. And Socrates stands with Leonardo da Vinci, Nicholas Copernicus, Charles Darwin and Albert Einstein as a beacon of inspiration for independent thinkers. But he came first. Cicero said of Socrates that, “He called philosophy down from the skies and into the lives of men.” So use Socrates’ principles in your life, your work, your learning, and your relationships. It’s not about Socrates, it’s really about you, and how you can bring more truth, beauty and goodness into your life everyday.
9.“We’re here to put a dent in the universe. Otherwise why else even be here?”
Did you know that you have big things to accomplish in life? And did you know that those big things are getting rather dusty while you pour yourself another cup of coffee, and decide to mull things over rather than do them? We were all born with a gift to give in life, one which informs all of our desires, interests, passions and curiosities. This gift is, in fact, our purpose. And you don’t need permission to decide your own purpose. No boss, teacher, parent, priest or other authority can decide this for you. Just find that unique purpose.
10. “Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of other’s opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”
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Thursday, June 17th, 2010
Start-ups hungry for cash are often expected to pay a fee to pitch to angel investors. But some free services are cropping up to counter the so-called pay-to-pitch model.
Venture Hacks, a for-profit site that provides advice to start-ups—say they have received pitches from more than 1,000 start-ups, mostly consumer Internet companies. Of the 48 companies featured so far on AngelList, about half have received funding, they say.
The service, he says, “is good at getting worthy start-ups into the inbox of investors.”Marco Zappacosta, founder of Thumbtack Inc., a site that lets people book services like tutors and dog walkers, won three commitments from angels after pitching his company in March at an Open Angel Forum event in San Francisco. He then turned to AngelList and received three more commitments to close a funding round at $1.2 million in June.
Not all entrepreneurs have won investments. Jen Lilienstein, one of six entrepreneurs selected to pitch last month at an Open Angel forum in Los Angeles, hasn’t raised any cash for her start-up, Kidzmet.com, which helps parents enroll their kids in extracurricular activities.
Some pay-to-pitch services have changed their business models amid the criticism. In September, FundingUniverse LLC stopped charging a $125 fee for entrepreneurs to pitch at its events, attended by angels and loan providers like banks. The winners of its events receive a few thousand dollars in in-kind services, and sometimes, investments.
FundingUniverse does, however, sell products through its website, such as a $99 online “diagnostic tool” that analyzes a business’s funding prospects. “We think the services we do charge for are perfectly acceptable,” says Alexander Lawrence, a partner at the company.
Open Angel Forum, which holds free pitch events in various cities where entrepreneurs selected from a pool of applicants can pitch to about 20 to 30 angel investors. At Open Angel’s first event in Boulder, Co., in February, three of six companies found new investors.
Free service, AngelList, started in February by angels Naval Ravikant and Babak Nivi, vets dozens of deals before highlighting the best ones in emails each week sent free to a group of 200 investors.
The free services come in the wake of recent criticism of the pay-to-pitch model, which some angel investors have argued is justified because they offer advice and should be paid for their time. Mr. Calacanis, an outspoken figure in the tech industry, last fall publicly admonished angel investment groups for charging bootstrapped entrepreneurs hundreds, if not thousands, of dollars to pitch to them.
Some pay-to-pitch services have changed their business models amid the criticism. In September, FundingUniverse LLC stopped charging a $125 fee for entrepreneurs to pitch at its events, attended by angels and loan providers like banks. The winners of its events receive a few thousand dollars in in-kind services, and sometimes, investments.
FundingUniverse does, however, sell products through its website, such as a $99 online “diagnostic tool” that analyzes a business’s funding prospects.
Tags: Angel Investors, Business Investment, Start-up Funding
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Tuesday, June 15th, 2010
Do Your Homework
If you’re financially motivated to launch a business, you may be tempted to simply jump in. But experts strongly recommend first taking the time to do some research to determine if your venture has legs to stand on. Otherwise, you could end up in worse economic shape.
“Once you’ve started a business, you’ve already invested a lot of money and time,” says Andrew Zacharakis, professor of entrepreneurship at Babson College in Wellesley, Mass. “If you find out afterward that consumers don’t want what you’re selling, it can be very hard to make a midstream adjustment.”
One way to explore a business idea’s feasibility is to solicit the opinions and advice of experienced professionals in your target industry, even prospective competitors. Mr. Zacharakis recommends starting at trade shows, seminars and other business events if you don’t have specific contacts in mind. Ask people what they like and don’t like about your planned venture, if they foresee any obstacles to building it, and what suggestions they might have.
Also go directly to your target market and ask about their interest in your product or service and how much they’d consider paying for it, Mr. Zacharakis says. If you plan to sell a product or service to pet owners, for example, you could canvass dog parks, groomers and veterinarians’ offices.
Low-cost services like SurveyMonkey.com and Zoomerang.com let you compile a survey online. In general, you pose a question and select answer options, such as multiple choice or fill-in-the-blank. Then you receive a Web link that you can post to your Facebook page, Twitter feed, personal blog or other website.
Get Real Feedback
Richard Daniels and Seth Burgett implemented this strategy before co-founding Yurbuds, a St. Louis-based maker of custom-fit earbuds, in early 2009. More than 300 survey takers provided insights into the features that matter most to them in portable listening devices and how much they’d pay for the ideal pair.
The duo—who met soon after Mr. Daniels was laid off from an executive job and while Mr. Burgett was in business school—now sell the earbuds in about 200 retail outlets. The firm is on target to be profitable by next year.
“You have to roll up your sleeves and talk to real people to find out if your business idea has value,” says Mr. Daniels. “Hope is not a strategy.”
Tags: Starting a business.
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Tuesday, June 8th, 2010
If starting your own business later in life is an appealing idea, keep these tips in mind
1. Keep things lean. As with any entrepreneur, older people who start their own business would do well to keep expenses in check, particularly at the outset. Says Liz Dahl, 61, who started the travel Web site Boomeropia.com: “I first thought of starting a travel magazine for boomers, but it made more sense financially to create a Web site instead. That way, money was not really an issue.” Matthews says that sort of caution is typical among older entrepreneurs: “With their experience, they’re better at managing risk than others.”
2. Leverage networks. “Be sure to use your network of friends, family and colleagues throughout the launch and growth of the company,” says Rodrigues. “Capitalize on their assistance and collective wisdom.” Use the resources at SCORE.
3. If you lack a skill, partner with someone. “I found a partner who knew the things I didn’t — particularly the technical side,” says Dahl. “I knew [public relations], buttechnology was difficult. So by partnering with someone who had those skill sets, we put in very minimal money and relied on sweat equity to get launched.”
4. Don’t get discouraged because of your age. Although they’re starting ventures at record levels, older entrepreneurs say there’s no shortage of people who will attempt to disparage the idea of starting a business later in life, citing unnecessary risks, health concerns and other arguments. If the passion is there, stay the course. Nagamine countered naysayers by focusing on others who shared her entrepreneurial spirit: “I started to attend business classes, networking forums and surrounding myself with like-minded people.” Adds Dahl: “It’s never too late to pursue what you love. Boomers have always been rebels, so why stop now?”
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Sunday, June 6th, 2010
The process of selecting, pitching and ultimately negotiating with a VC can be intimidating, especially to those not accustomed to the world of high finance. I asked Lori Hoberman, head of Chadbourne & Parke LLP’s emerging-companies/venture-capital practice in New York, to explain the various steps. Here’s what she said:
Pinpoint the ideal VC.
First, an entrepreneur must target the right venture capital investment fund to pitch. That requires some research. It’s a good idea to attend venture capital and private equity conferences. Ask an attorney or accountant for a referral. Online databases such as VentureSource (owned by Dow Jones) provide information on the latest venture deals. And most VCs host websites that describe their “sweet spot” and existing portfolio investments, Ms. Hoberman says. Don’t waste time pitching your biodiesel fuel business to a VC that only invests in software.
Prepare a “teaser” document.
This one-or two-page document that you send to VCs is your way of introducing yourself—and it’s got to be memorable. Tell the VC who you are, what need you fill in the market and how that market translates into dollars. Because most VCs are barraged with investment requests and can give each one only limited consideration, every sentence of your teaser needs to “answer the question about why an investor would ever dream of putting money into you,” Ms. Hoberman advises. “It forces you, as the entrepreneur, to think in sound bites.” She recommends incorporating text and graphics (pictures, pie charts or graphs) into the document. “The whole idea is to tease the investor into wanting to hear more,” she says.
Send financials.
If your teaser has done its job, a VC often will ask you to provide financial statements, including projections. If you’re building out your business model and are attracting paying customers, “it’s a much easier sell,” says Ms. Hoberman. Show how you’ve gotten to your current stage, whether that’s through bootstrapping, help from family and friends, or funding from angels.
Prepare your pitch.
If a VC wants a meeting after reviewing your financials, the initial face-to-face encounter will probably last less than a half hour, so use the time wisely. Don’t forget the thirty-second rule, Ms. Hoberman advises. “You have to tell the investor in the first thirty seconds who you are and how you are going to make them money,” she says. If you plan to show visuals, such as a slide show or online demonstration, keep it short so that there’s time for questions. Demonstrate your belief in the company and your knowledge of the market or industry. “The VC wants to get a sense that you know what you are talking about,” she says. When a company has more than one founder, it’s also important for partners to demonstrate that they are a strong management team. “Look at each other when you talk, and show respect,” she says.
Review the terms.
If your pitch was successful, you’ll receive a term sheet for a first or “series A” round of financing (later rounds are called series B, series C and so on). The document outlines the deal that the VC is proposing before investing in your company. At that point, you and your advisors (specifically, an attorney who specializes in venture financing) should begin negotiations. The term sheet outlines voting rights, liquidation preferences and, more important, how much equity the VC will receive.
Figure out what you’re worth.
In order to negotiate, you need to place a value on your company, which can be tough or imprecise at such a young stage. One approach is a so-called back-of-the-envelope valuation, which can be determined by deciding how much venture capital the company needs and how much equity you’re willing to sell. “You try not to give away more than one-third of the company in the series A round,” Ms. Hoberman says. For example, if you need $3 million in financing for your consumer product company but don’t want to sell more than a one-third stake, you’d value your company (prior to receiving the capital) at $6 million.
Do your due diligence.
Before signing on the dotted line, take some time to consider the ramifications of your decision. Talk to other companies in the VC’s portfolio about their experiences. Keep in mind that the VC will take board seats and expect progress reports at monthly meetings. Good VCs “understand the hills and valleys and can wait it out,” Ms. Hoberman says. “The really bad ones ream the entrepreneur every time the slightest thing goes wrong.”
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