Startup Advice

I got an email the other day from a Web entrepreneur who wanted me to write about his startup.

I had to tell him it's too early for me to get involved. I don't like writing about what people say they're going to do - I like writing about it after they have earned the ink, by producing tangible results (money, market share, disruption, creative recognition, etc.)

He wrote back and said he understood - but did I have any tips for him, especially about raising seed money? I didn't have time to say anything brilliant, but here's the advice I offered:

What can I tell you? Take a breath. Take your time. See if you can generate some income before you go seeking investors; the more self-reliant you are, the more they will pay to get in on it.

* Surround yourself with people who like what you're doing and want to contribute. Pay them in promises - that at some point, if you see a return, they will too. But try not to give up equity until you really have to. For some people, the adventure and the experience will be enough.

* Clean up your website. Make it as professional-looking as possible. I see lots of grammar mistakes, mis-spellings, and room for improvement.

* You're doing the right thing in terms of reaching out to media, bloggers, etc. But remember - your site isn't news. It's how you help people that creates a story.

* And check out Zilch, the book I reviewed in my Post column this week. Lots of great advice for getting things done on a zero budget.

Researching your target market

In the wake of my Financial Post column this week urging startup entrepreneurs to do more market research, I got an email the other day from a Winnipeg baker asking where to find relevant information for his planned bakery/pastry business.

Here's what I told him:

Hi, William (not his real name): I suggest you start with your local library's reference librarian. He or she will know what kind of market data their library has (or has access to), and they may be able to make other suggestions as well. Your local economic development office may also have useful data.

You can also do a lot of vital market research yourself. Hold a focus group (call it a party) and serve some pastries. Document everything: which product do they like best? What do they like about it? What do they dislike? How much would they pay for a slice or a full cake? How often would they buy it? Why would they buy it?

If you are going to sell through distributors, get out and talk to them. What are the margins in your market, who are the competitors, how do the distributors/retailers think you should market your product? Listen carefully for resistance, suggestions, and anecdotes about similar products or initiatives and how they worked out.

I also suggest you find a startup group in your area. Meetup.com can help you find small-biz groups in your area. Groups like these can be very useful in helping you uncover unexpected problems and obstacles in your business - and people in these groups may have found solutions to problems you are having now. My mantra is, successful wolves hunt in packs; lone wolves die alone in the cold and the dark.

Good luck!
Rick

Startup Advice: "Commit to Making Decisions"

I'm working my way through ReWork, a book about no-frills startups. It’s by Jason Fried and David Heinemeier Hansson, the founders of 37Signals (which developed Basecamp, Backpack and other no-frills software).

You can download excerpts from the book here.

I’m now halfway through the book, and a bit disappointed that it reads like a primer on startups. Some of it contradicts conventional wisdom (“Learning from mistakes is overrated”; “Why grow?”; “Embrace constraints”), and some of it is insightful and motivating (“Planning is guessing”; “Make a dent in the universe”). But not a lot of meat on these bones.

Still, here’s one part I really liked. “When you put off decisions, they pile up. And piles end up ignored, dealt with in haste, or thrown out.”

The authors’ solution? “Commit to making decisions,” they write. “Don't wait for the perfect solution. Decide and move forward.”

I have met many entrepreneurs who got hung up on non-essential details – the company name, someone’s title, the color of the prototype. You can't know what works best until you try. So make the best decision you can, and move on - staying prepared to fix it later, if necessary and when convenient.

“Long projects zap morale,” say the authors. “The longer it takes to develop, the less likely it is to launch. Make the call, make progress, and get something out now – while you've got the motivation and momentum to do so.”

Now that’s pure gold. And not just for startups, but for any business that aspires to innovate, change or lead.

What decisions are holding you back?

Starting a Business in one easy question

I just started using Yahoo’s online “Answers” service to suss out some anecdotal information for an upcoming speech. Today I discovered its daily archive of questions relating to “small business.” Scores of people looking for very specific business intelligence, such as how to conduct online surveys, how to make aromatic candles, or, hmm, how to recruit actors for an adult video business.

Anyway, the more general questions fit my expertise. I wrote the following reply to a recent college grad who says he hates his current job and wants to open a private music studio in his apartment. (Of course, most of this advice will relate to starting any kind of business.)

Some of the best businesses in the world have been started by people who hated their jobs and longed for something else. But new businesses fail when they are launched on impulse, without proper planning. Don't you make the same mistake.

You will be telling your students to practice every day - and so should you. In business, it's called planning. You must know what your costs are going to be, how much you will charge, how many students you need to make a profit, and how you are going to attract them.

Set out a timeline for starting your business. Allow adequate time for researching the market, preparing demo videos, developing a professional name and logo, researching your pricing, identifying potential allies and partners, creating a thoughtful marketing plan, and exploring zoning and licensing laws (you can flout them if you want, but you should know what the laws are that you are flouting),

Most importantly, find a mentor (or maybe two): someone who has run a business like yours, knows what he or she is doing, and is willing to share experiences and teach you the ropes. Don't try to do it all yourself: you will be wasting time reinventing the wheel and making old mistakes.

You may have to stick with your job for another few months. But it will be easier knowing that you are working on an exit plan. And you will have more time to bank money to support you during the first lean months.

For online advertising, learn about pay-per-click ads: Google AdWords, for instance. They let you target people who are searching for information on specific keywords - say, "music teacher" or "saxophone lessons" - within your own geographical market. And you pay (say, 20 cents a click - you set the price!) only if someone clicks through to your website.

Your site can be a one-page information site to start - that often comes free when you buy a domain name.

The good news is that since you are used to working for minimum wage, your revenue goals can be modest. If you are good at what you do, and you do a proper marketing job, you should have no problem replacing that income.

Follow your dreams - but run a check on them first to make sure they make sense.

* For more questions and answers on small business issues, check out Yahoo Answers here.

Should you start using Yahoo Answers? It may help your search engine positioning. I registered three days ago. Today my Yahoo registration (with my scanty record of questions and answers) ranks 9th when you Google my name. That ranks ahead of all my columns in the National Post or (sigh) 19 years of writing for PROFIT Magazine...