Sunday, February 28, 2010

‘Dear Abby’ Style Advice to Real Entrepreneurs

I always love to get questions from my readers, and I answer them all, but sometimes I feel like the “Dear Abby’ for entrepreneurs. Many of the questions I get make me realize how well off most of us are, as we understand the challenges that others have to face. If you have some insights, don’t hesitate to let me know. Here are some real cases:

Dear StartupPro,

I am a minority looking for funding for a Home HealthCare Service business. It has been hard in my years of searching for funds. I have had some unfortunate trying times with the loss of a daughter and baby grandson and having to raise a now 17-year-old, we are upside down in our mortgage. We were taken for our money in trying to straighten out credit cards, had good credit, but my husband and I and now have nothing, and just need some special person to help me out.

I am a young senior educated in Business Administration, with more than 15 years in the HealthCare and Financial Service business. I have developed a Non-Profit and a For-Profit HealthCare and Home Care Agency, and I have an Executive Summary and Business Plan. I am looking for funding of $50K in startup funds, and would like to partner with the right investor to provide this and other future funding as needed.

Thank You, God Bless – UNFORTUNATE TRYING TIMES

Dear Unfortunate,

I understand your situation, and unfortunately I don’t have any easy answers for you. I actually recommend that you consider working for an existing home healthcare service business until you get back on your feet.

Working for a similar existing business will give you experience, credibility, and connections, and then allow you to strike out more successfully on your own later. You will find that investors don’t often invest in a services business, since there are no assets for equity, and banks don’t lend money to someone with no credit and a mortgage problem.

Dear StartupPro,

My husband was in the title business for 16 years, and then became a technology educator. He has a Masters in his education field. He’s at retirement age but wants to start a dropout prevention or GED school. We live in East Texas were the education level is low and dropout rates are around 17%. I am retired but formerly have been a marketing director and involved in CPA financial services.

I have been reading your articles but wonder with our type of dream the same rules apply since it would be tied into the government. Where to start for funding and does a business plan differ?

Thank you. Respectfully, WHERE TO START


Dear Where-To-Start,

The type of business you describe is sorely needed, but sounds like it may really be a non-profit. Either way, I would recommend that you start by finding a local SCORE (small business mentoring) or SBA (Small Business Administration) office in your area, and talking to them.

The business plan expectations are essentially the same for both non-profits and for-profits. In your situation, you may be able to qualify for some kind of a government grant, or certainly a loan. You may have less luck getting an equity investor interested, since the financial returns would likely be low.

Dear StartupPro,

My question is how to treat a valuable domain name during the funding stage? My initial thought was to place a value on the name and lease it to the company with the option to buy after a pre-determined number of years.

I would like my sweat equity and existing IP to be the risk that I incur without also risking an asset that could easily represent the majority of my total assets. By separating the name in a lease arrangement, I was also hoping to be able to offer greater equity to a potential co-founder and early employees.

Sincerely – VALUABLE DOMAIN NAME

Dear Valuable-Domain-Name,

I would recommend that you put the domain name into the valuation for your company.
I think you will need it in to get an investor, and keep the equity percent required down to a reasonable level.

Without the domain name, your valuation may be too low to justify the investment amount you need. In addition, investors are always wary of entrepreneurs who seem to be trying to minimize their risk, meaning trying to move risk to the investor.
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These are real requests from the past couple of weeks, with some masking to protect privacy. You might have faced similar situations, and would like to share how you handled things Let’s work together to provide the best guidance possible. If we help each other, then we all win.

Marty Zwilling


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Tuesday, February 9, 2010

Understanding Real-Time Web Search Engines

By Evan Britton

Each day, millions of internet users post updates on a variety of social networking sites. People make these updates to post what they are observing right now or give their opinion on something that is currently happening. Because of all of these updates, there is a wealth of real-time information on the web. This information is often relevant and useful for entrepreneurs and startups - so you need to understand the alternatives and implications.

Perhaps the most interesting feature of real-time search engines is that the results are updated each minute. So, if you do a search today, it will yield entirely different results than a search from yesterday. There are many instances in which a real-time search can yield better results when compared with traditional search engines. For example, if you want to see what people are saying right now about a person, place, or your business - a real-time search will give you a window into people's minds.

The most basic place to perform a real-time search is also the place where a lot of the real-time information comes from, Twitter. Simply do a search for whatever you want to learn about, and you'll see results sorted by the most recent posted update. Other engines have launched offering additional functionality. For example, if you want to see which links have been posted today on the real-time, you can perform a search at Sency and then click on one of today's most popular links.

Google has also taken notice of the real-time web and they have begun to mix real-time results into their engine. If you perform a search, you may notice a “Latest Results” box which scrolls while you are on a results page. These are real-time results that Google have mixed in. While it is helpful to have Google mix in these results, it is nice to have search engines entirely focused on the real-time web experience.

With more and more searches being performed in the real-time arena, a new industry is cropping up in an effort to help people get listed on the real-time web. The most important factor moving forward will be authority. The technology is going to improve so that results are ranked both on age and authority. So, to get listed on the real-time web, it will be important to have more followers, friends, and associates in your social network. Not only will you need a lot of people in your online network, but you will need quality people in your network.

So, if you have key people in your industry that you are linked to in your network, it will help you to become an authority in your niche industry. Also, quality will be important because with quality will come retweets and reposts - which will also end up helping you be displayed more on the real-time web.

The great thing about this niche is that it is early for real-time search. Even if you aren't a member of any social network, you can use real-time search engines at any time. In a simple fashion, they can open up the door to an entirely new area of the web for you. If you are already on a social network, you can learn about real-time engines work to help promote your personal brand for free. Overall, anyone that dives in today to learn more about the intricacies of this space - will become better informed as the growth continues in the future.

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Evan Britton is a longtime internet veteran who founded Sency in 2009. The goal of Sency is to bring real-time content, links, and tools, to internet users in an organized and simple fashion. Evan has been published in numerous top tier internet marketing publications, including Business Insider and Website Magazine. You can reach him directly via email.


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Wednesday, February 3, 2010

Critical Considerations for a Startup Advisory Board

By Bob Arciniaga

In developing the content for this article, it was very apparent this advice is not only critical for startups but for most companies. The suggestions are even more vital in a startup environment with constrained resources.

A properly built advisory board can be a huge strategic advantage to any company. On the other hand, an advisory board put together haphazardly can be the biggest mistake for a company in the early stages of business.

What makes a GREAT advisory board experience for both the company and the advisors is a high level of engagement. Advisory boards that do not have a high engagement factor can begin what we call a “death spiral” for a board’s culture. It starts with the advisors not understanding specifically how they are helping the company and leads to board members feeling like they are not adding value.

The company soon realizes advisors that are ineffective and not providing strategic value become more of a hindrance than a help. Meetings begin to get missed, conversations do not happen and preparation for meetings dwindles. Eventually, companies stop talking to advisors.

How do you avoid the advisory board death spiral? You start by building an effective, strategic board. Here are the top five tips to building an advisory board with a high level of engagement:
  1. Take your time. The more time you put into developing your board and selecting the “right” candidates, the more you and your company will gain. The biggest mistake we see companies make is not realizing how much time is necessary to properly build and manage an advisory board before they get started. Budget your time to spend a minimum of at least 100 hours of up-front time building your board and 25 hours per quarter in managing your advisory board to even get the minimum amount of engagement.

  2. Select the right board member. No matter how much time you put into your advisory board, if you have the wrong board members you will not get the optimal level of engagement or help from your advisors. Most startups choose board members for one of the following reasons: (a) big name or business celebrity (b) the company wants to have them as a client (c) they think the person will raise money from them or (d) they have a personal relationship.

    All of these are the completely wrong reasons to invite someone to serve on your board. Why? Could you fire any of these people if they don’t work out? Probably not. Adopt the following rules: don’t put your advisors names on your website, don’t “pitch” them anything (services or investment), and only seek advisors with no personal relationship.

  3. Provide real compensation. One of the biggest myths that startups have is that you do not have to pay advisors, or you can pay them in future-value stock. What is the value of free? Stock is not adequate compensation. Most quality advisors know that chances of a liquidity event are rare.

    We suggest compensating board members in a combination of stock and stipend or bonus based on performance. The stipend should be between $150 and $300 per hour with an equity kicker based on achieving goals.

  4. Define the board structure. Your board is a part of your company and should be a highly formalized process with a solid agreement in place. We strongly recommend you do not copy and paste something you found on the Internet. Every advisor should review agreements with their general counsel.

    Eliminating all liability and providing full indemnification are going to be critical to all corporate counsel before signing off on an executive’s ability to serve on your advisory board. Agreements protect your interests and the advisory board members interests.

    We also recommend a full board charter for every board. Meetings should take place every quarter, with no exceptions. Boards should have at least five members and no more than eight. Meetings should primarily be in person.

  5. Prepare for board meetings. Not everyone is suited to run a board meeting, no matter what the title. Strategic facilitation can be difficult. The biggest mistake we see CEO’s of companies make (no matter what the size) is not being prepared for a conversation with their board members or not properly preparing for a quarterly meeting.
Your board meeting should NOT be a data dump of financials. It should be a high level discussion of ONE issue or ONE opportunity and your options for dealing with that issue or opportunity. You are seeking their ADVICE!

These are the five critical considerations for building an effective advisory board. There are many more, but this gives you a start! Treat your board responsibility with the formality it deserves and always focus on the engagement factor.

Realize there is more that goes into keeping the engagement factor high. The best advice, if you are not ready to wholly commit to a professional, well-managed board – STOP. Only build an advisory board when you are ready to fully engage.

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Today's guest blog is by Bob Arciniaga, Founder of Advisory Board Architects (ABA). Bob is a serial entrepreneur with many years as an Executive Recruiter who now runs ABA to build and manage quality corporate advisory boards. See his regular blog or contact him directly via email.


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