I have spent the last several days on vacation in south Florida, visiting my folks on the occasion of my father’s 83rd birthday. I brought my laptop, which I rarely travel with, because I was sure I would find the time to write a daily post for my Low Cost Startups blog. Now sitting in the West Palm Beach airport, way early for my flight (we were sure the airport would be mobbed with people returning North after President’s week) I have the first opportunity to actually turn my thoughts to business and the task of creating something cohesive and interesting to share with readers.
I realized upon arrival in sunny Delray Beach (yes the sun came out and gave us the mild, breezy, temperate weather that people flock here for) that the best gift I could give my Dad for his birthday was to focus on the primary reason for my trip, spending time with my parents, rather than my usual habit of squeezing in “productive” work hours. As a result I stayed relaxed and made my focus having a great weekend celebrating my Dad’s birthday. I am happy to report that a good time was had by all.
I couldn’t help noticing how many parallels I could draw between being an Olympic champion and launching a successful startup.
We spent some evenings watching the Winter Olympic events. Even though I was taking a break from writing blog posts, I couldn’t help noticing how many parallels I could draw between being an Olympic champion and launching a successful startup. Like most non-Olympians, I have always been fascinated by the amazing dedication that Olympic athletes exhibit at the games. They are so serious about everything, their complete confidence in their ability to win the gold, their mental preparation, their incredible levels of physical fitness. We watch them in awe, admiring their determination, discipline, just about everything about them. We get glimpses of a competitor as he waits for his turn, eyes closed and ignoring the cameras fixed on his every move, as he is obviously going through a visualization exercise, imagining the slope, the ice rink or the bobsled course, seeing himself going through each move perfectly until he crosses the finish line to win the gold medal.
We see these champions at their very best, and expect nothing less than a tremendous performance. This is why we tune in to the Olympics, to share these ‘mountain top’ moments in the athletes’ careers. Whether they go home with a medal, or crash and burn before they reach the finish line, we witness these individuals giving their all to achieve their goal.
Win or lose, their intention is to bring on their ‘A-Game’ every time they compete. In order to have the chance to show their ‘A-Game’, they work day in and day out, for countless hours, doing everything they can to prepare them for the big moment. And we expect nothing less of them. As I watched some of the video clips of athletes preparing for the Games back home, I was struck with the obvious – just how much hard work and perseverance it takes to get to the Olympics. And it’s not just a few months of training anymore. In order to be competitive today an athlete must dedicate most of his or her years leading up to the Olympics doing everything possible to prepare to win.
Quote for Today:
You have to learn the rules of the game. And then you have to play better than anyone else.
Applying this analogy to a small business startup is very empowering. It becomes clear that planning and preparation are THE critical factors. None of these big wins happen overnight. And several of the winning athletes we’ve seen in the last 10 days had near catastrophic setbacks along their road to Winter Olympics XXI. Yet they still were driven to be the best in their sport, and go back to develop their ‘A- Game’ all over again.
The takeaway here is that just like an Olympian going after the gold medal, a hopeful entrepreneur must be willing to put in the time and effort to prepare for launching a new startup. You can’t expect to bring your ‘A- Game’ to the business world without the same planning, hard work and conditioning we have been witnessing in the Vancouver Games this last week.
My good friend and social media guru, Mr. Midas, has been helping me with the technical aspects of my blog. Last week he insisted that I open a Twitter account. As one who is still coming to terms with the various components of Facebook and WordPress, I protested that I wasn’t ready for Twitter yet. Mr. Midas insisted. In fact he literally opened a Twitter account for me at our very next social media ‘counseling’ session.
Now, needless to say, in addition to coming to grips with posting to my own blog and on my Facebook page, I am struggling with Twitter. But this morning something happened that forces me to admit – Mr. Midas – you were right!
One of my morning tweets was forwarding (in Twitter talk this is called ‘retweeting’) the link to an article in yesterday’s Harvard Business Review that is a perfect one to share with all those interested in low cost startups and what it takes to transition to an entrepreneurial existence. Professor Daniel Isenberg (Professor of Management Practice) of Babson College posted a 10 point questionnaire for all those considering making the leap to owning their own business. It covers a lot of important points to consider if you want to know if you have what it takes to be self-employed. The comments are worth reading too. And Professor Isenberg does a nice job of responding to his comments.
Another recent article with ideas worth sharing is from New York Times Small Business Conversations. It is an interview with George Cloutier, a consultant whose recent book has a terrific title ~ Profits Aren’t Everything, They Are the Only Thing (Harper Business, 2009). I was in total agreement with Mr. Cloutier until I got about half way through the article. Once he starts on the subject of micromanagement, our philosophies totally diverge. But the first part is dead-on for differentiating who makes money as an entrepreneur from who does not.
I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed.
I’ve failed over and over and over again in my life. And that is why I succeed. ~ Michael Jordan
Although Mr. Cloutier focuses his services on existing businesses that need help being more profitable, he has several words of wisdom for the budding entrepreneur as well. Here are the two beliefs that resonate the loudest with me.
1) Many people whose businesses have declined are too quick to blame the recession. Often the reason your sales dry up are because you need to do more marketing.
2) The common thread for many companies in trouble is that they fail to focus on the basic financial information, such as a regular Profit and Loss Statement. Also, business owners don’t pay attention to their cash flow.
For hopeful entrepreneurs it is important to understand what lies ahead in the distant future as well as the near term. That’s why Cloutier’s advice is as important as Professor Isenberg’s test in deciding if you have what it takes to survive a startup.
What do you think?
I have been getting a lot of support in this phase of my blog launch from Angela Ferraro-Fanning, a graphic designer who runs her own business in Wisconsin. I came across Angela’s website last summer when I was researching the Marketing Chapter of my book. I found an article on Angela’s Blog about creating a social marketing plan. I was impressed by the design of her site, with its appealing background patterns and colors. More importantly, Angela struck me as someone on her game, both from the way she presented herself and her willingness to share her knowledge freely on her site. The clincher was how friendly she looked in her photo.
So I sent her an email introducing myself and explaining the book project I was working on, and asked if she would have time for a 30 minute phone interview to talk about her business. We had a lovely conversation about how Angela started her business, marketing strategies she used to grow her client base (which were low-cost AND effective), and what her business was like now that she was significantly past the startup phase. One of her low-cost marketing techniques is included as a ‘Success Story’ in Chapter 24 of my book.
Quote for Today:
The beginning is the most important part of any work … for that is the time at which the character is being formed and the desired impression more readily taken. ~ Plato (The Republic)
I re-connected with Angela just a few weeks ago when I realized I was spending more time contemplating my blog than actually putting one together. Her company, 13thirtyone Design, helped create the look of this blog. Angela understood that I wanted something simple, low-cost and really soon. I love the result; I got exactly what I wanted without investing a ton of time or money into the project. I could focus on what I really wanted to do which was to start posting content.
After writing yesterday’s post on Budgeting, I wanted to follow up with a real life example of a successful business that had begun as a low-cost startup. Once again I called on Angela, with a hunch that her design and business savvy were extensions of a practical approach to all aspects of running her business, including management of costs and containing overhead. Fortunately for me, my hunch paid off. Here’s the 411 on how Angela managed her budget during her startup period.
Q: What motivated you to start your own graphic design business, 13thirtyone Design?
A: I was working for a larger marketing design firm as an employee. I enjoyed the work and my clients, but I was getting burned out from my long work day which included a 45 minute commute each way. I also believe that the foundation for good design work is a close and direct working relationship with clients, which is more easily achieved in a one person design firm.
Q: How did you manage to make the leap from full-time employment to self-employed entrepreneur?
A: After I left my full-time design job, I took a simple, part-time job locally to give me an income stream I could count on. I worked 5 hours a day, from Noon to 5pm, five days a week for several months. This gave me enough time to build my business and a small cushion that provided a financial safety net.
Q: Can you tell me what equipment and supplies you had to purchase in the beginning?
A: I was really lucky because most of my design work requires creative talent as the main ingredient, so there weren’t a lot of startup costs. The most expensive item I bought was my computer. I shopped carefully on the Apple.com site to find a refurbished MAC which I still use today. It cost about $1,500. (Check out available refurbished MACs at Apple Store)
Q: Did you buy your software at the same time?
A: I already had some software and basically purchased upgrades of packages over several months’ time. That way I could use the cash flow from my business rather than coming up with all the money in the beginning.
There are always reasons, within the control of a business owner, for the ultimate success of a company.
I was excited about how neatly Angela’s story of a choosing a refurbished MAC dovetailed with yesterday’s list of The 5 Best Tips for Keeping Startup Costs Low. But I was not surprised. There are always reasons, within the control of a business owner, for the ultimate success of a company. Ultimately the only reason a business fails is because expenses exceed revenue. By starting out with a written, bare bones budget, you can ensure a much greater likelihood for moving past startup and creating a successful company.
Budgeting for your business is very much like managing a household budget. You set limits on your spending based on various factors, like how much is in your savings account or how much you can afford to spend based on your monthly income. The same is true for your startup.
When I was working with my editor at Alpha Books, Paul, we worked through guidelines that would frame the content and approach of The Complete Idiot’s Guide to Low-Cost Startups. From the moment we began discussing the concept of low-cost, Paul insisted that we keep our startup budgets to $1,000. I remember my first reaction was – how on earth was I going to come up with enough startup ideas to fill a book if all someone could spend upfront was $1,000 or less. But the more I thought about different ideas, the more creative I became with a small budget. Keeping costs low brings the American dream of starting a small business to reality for many more people than say coming up with the typical $100,000+ it takes to buy most franchises.
Today’s quote, which we all have heard since childhood, takes on a new meaning when you consider that your basic business formula is
Revenue – Expenses = Earnings
The appeal of keeping the startup costs to $1,000 is obvious; the risks associated with failure become much more tangible-you can get your thoughts around it, picture it, and deal with it. What if you bought a new 45 inch HD Television and it stopped working right after the warranty ran out? (This never happens, now does it?)
If you have a job that requires you to manage a budget, your spending limits are established for you. You may have some leeway to determine how to spend your budget, but your hands are mostly tied when it comes to how much you spend. This all changes when you go out on your own. Now you are the investor and the boss in charge of monitoring expenses.
Quote for Today:
A penny saved is a penny earned. ~ Benjamin Franklin
Here is a list of the 5 best tips to keeping your startup costs as low as possible:
1) Use stuff you already own
2) If you absolutely have to buy something, like a piece of equipment, shop for used items. There are plenty of fire sales going on right now with bankruptcy filings at an all time high
3) Write it down before you spend your first dollar– if a budget isn’t in writing it doesn’t exist
4) Make yourself accountable – compare what you are planning to spend to actual prices BEFORE you commit to buy it
5) If you HAVE to acquire some piece of technology, whether hardware or software, DON’T go chasing the latest thing on the market. We all know that:
New + Improved = For Sale at Top Dollar
I’m not advising you to purchase used computer equipment. Just don’t use starting your own business as the excuse for buying the latest version of whatever. I actually have many stories I could tell you about new entrepreneurs who did buy some cool new, expensive device with their seed money. But here’s a short one that makes the point.
Several years ago I was working on a business plan with a long-time client and his new partner. They had a great idea for a new software concept that would serve a particular industry. During the weeks we were working on the plan, each partner put in several thousand dollars to launch their idea. At the very next meeting the new partner brought his newly purchased IBM tablet laptop, which he had considered essential to getting the software project off the ground. Cost? Around $4,000. Essential to a successful project?
How long would you guess this partnership lasted? What tips can you share that kept your startup costs to a minimum before you started your business?
Most working people are risk averse. When you think about it, risk avoidance as a personality trait is required in order to be a good employee. Compared with an entrepreneur, you have very little to lose when you work for someone else.
Your job and daily responsibilities are outlined for you in your job description, your working hours are most often set by your manager. You get reviews with feedback on how you’re doing; you have help setting professional goals. In a positive economic cycle you can expect to stay employed as long as you live up to your boss’ expectations.
These are just some of the reasons why making the transition from employee to entrepreneur is so much easier when you keep your startup costs as low as possible. The less you risk up front, the less pressure you have to deal with in your first years of business ownership. There’s less money to raise, less of a monthly nut to meet to cover your overhead – you get the idea.
The really exciting part is that you can begin to celebrate success so much quicker than if you launch a venture that requires a great deal of seed money.
Quote for Today:
“Bootstrapping an entrepreneurial idea with your own capital is often the best way to go. It’s so hard to raise money during a recession….”
~ James Shein, Professor, Northwestern University Kellogg School of Management http://www.newsweek.com/id/211573
What could you do if you only had a $1,000 and yourself to invest in a startup? Start to think in these terms. Surprise yourself with ideas.
Tomorrow’s topic: Creating a Startup Budget
A common first step when launching a startup is to contact one or more professionals who help new business owners set up shop and make the initial decisions that seem critical to the new entrepreneur. Seeking the guidance of a seasoned professional advisor, whether a lawyer, CPA or banker, is extremely important to laying the right foundation for a sound business. But for me, the best support team I have ever had came from building relationships with other people who were creating businesses that paralleled my own.
When I left a global accounting firm to start my own CPA practice, I was the only person I knew from the world of Big 8 firms (yes it used to be the Big 8, back in 1986) who was going ‘out on my own’. In fact, as word spread that I was leaving to start my own practice, friends and colleagues saw this as a gutsy decision. They were not comfortable with the prospect of working without the support of a firm behind them . Too many things to keep up with, too many deadlines. Having come from a family of entrepreneurs, starting my own home based practice was always my goal. It was the basis of my plan to continue working AND raise my children.
As an entrepreneur you have to look harder for the right opportunities to meet potential colleagues.
At first I relied a lot on my former colleagues who graciously took my calls and helped me work through any client situation that needed the benefit of more than one mind to solve a problem. Within the first year of hanging out my shingle, I was introduced to two other independent CPAs who had also started practices the same year as I did. We remained close colleagues for 20 years. We listened to each others’ struggles and learned from each others’ mistakes. We shared advice from mentors and different organizations that we belonged to.
There are valuable lessons to be learned from training programs, conferences, the many business books in print and from online research. But nothing feels as comforting as getting advice from someone you know and respect exactly when you need it, and knowing that you can count on going back for more. Equally rewarding is being there for a colleague or business associate when they reach out for your advice and counsel.
You can’t count on the people you need to simply materializing when you need them. Building a support system of people you can seek advice from usually takes some effort and purposeful planning. But it’s not hard to find if you make a point to be in places where other business owners are likely to be. Entrepreneurs are typically happy to share their stories with other business owners, and are always looking to learn something from someone else that will help them with their own issues. When you are a professional, whether a CPA, lawyer, engineer, etc., there are professional societies that fulfill the function of creating events and meetings for members to get together. As an entrepreneur you have to look harder for the right opportunities to meet potential colleagues.
Typical ‘networking’ events are geared toward providing attendees the opportunity to offer their products or services to potential customers. Many networking groups specifically restrict their membership to only one participant from a particular type of business or profession. The goal at these events is to build relationships with people who can help you market your business.
Building a true support system is about creating relationships with people who can give you a helping hand over the hurdles you will regularly face. Over the weekend I had the chance to be a part of the best ‘networking’ event I have attended in a very long time. I knew no one other than the organizer of the group, Dorothea Bozicolona-Volpe, an experienced social marketer, and the host, Stacy Williams, owner of Prominent Placement, Inc. a boutique firm specializing in search engine optimization. There were about 20 people in attendance. The event is held quarterly, in metro Atlanta, with the invitees being women in all kinds of businesses. There was an Italian themed dinner (pot luck buffet), wine, brief introductions and a lot of socializing.
What made the evening unique as a ‘networking’ event was this – the focus wasn’t on card swapping (which was definitely done as appropriate), or talking about each other’s ideal customer, or even about ‘working’ the room. The evening’s hosts created an atmosphere of true fellowship which encouraged the exchange of stories and ideas. I met a lot of interesting people AND had the opportunity to talk about the new things I’m doing. I have to confess that when you say you have written a book that’s about to be released you ignite a certain curiosity in the group. Most people have at least one idea for a book and want to know how to get published. I was willing to share that experience with anyone who wanted to know. And I got lots of advice from others who wanted to help me succeed in my new ventures. How great is that?
In their book Trust Agent, co-authors Chris Brogan (www.chrisbrogan.com) and Julien Smith emphasize that the fundamentals of being a successful ‘internet entrepreneur’ are based upon your ability to build trust with the people you reach out to, whether your goal is to create an audience of devoted readers or sell products or services to prospective customers.
Quote for Today:
“A trust agent’s job is …to make people feel comfortable ….building deep relationships before ever asking something of others. …(a trust agent) should be there for them.”~ Trust Agent by Chris Brogan and Julien Smith,
All through your career as entrepreneur, look for opportunities to connect with other business people on a deep level. Come to the party prepared to share your bag of tricks, and you will be rewarded with the support of those whose trust you earn.
Tomorrow’s topic: The Case for Sticking to a Low-Cost Startup Budget
There are several indications that the economy has already hit bottom in this Great Recession. The stock market, known to be a leading indicator of economic trends, has rebounded. Very recently, as large corporations announce their sales and earnings for the fourth quarter of 2009, there have been a few sectors, like technology, that appear to be roaring back to health. Companies like Apple, always a leader in innovation, are still moving forward – the new Apple Tablet is clear evidence of Steven Jobs’ faith in the future economy.
On the one hand, these upbeat omens hold the promise of more jobs on the horizon, of corporate America once again extending welcoming arms and taking employees back into the warmth of the fold. But seen with an entrepreneurial perspective, today can be the first day of the rest a new life as a small business owner. If you can manage to take the plunge.
If you have been thinking about starting a business of your own, this couldn’t be a better time. You still have a few months before all the experts agree that the economy is on the upswing. Even though some large firms are in hiring mode again, many economists fear that this trend is merely a temporary uptick. NOW is the chance to get a jump start on the competition. Even with some corporations growing their ranks again, there will always be many reasons why being an independent business owner will keep you competitive in the market place and give you an edge to win business.
President Obama is calling on Congress to recycle $30 billion of the remaining TARP funds into a new lending program to help small business owners get loans. The year 2010 may turn out to be the best year in a long time to start up a new business.
The year 2010 may turn out to be the best year in a long
time to start up a new business.
Wages for many salaried workers have actually declined in the last decade. With the job market flooded with unemployed individuals vying for jobs, that is unlikely to change anytime soon. In comparative terms, there is less to lose financially if you make the leap from employee to self-employed this year. The competition for jobs is bound to keep the downward pressure on salaries. People grateful to be back at work won’t protest the fact that they have to work harder to make less than they ever have before.
Many of today’s corporate giants came into existence during hard economic times, like Microsoft (1975) Revlon (1932) FedEx (1973) CNN (1980) and MTV (1981). There are hundreds of reasons why these companies succeeded in spite of the general economic conditions that existed when they were startups.
Here’s the Quote For Today:
This is a fantastic time to be entering the business world, because business is going to change more in the next 10 years than it has in the last 50.
~ Bill Gates, Founder of Microsoft, Inc.
The takeaway as it relates to your decision to start your own company NOW is this – tough times lower the barriers to entry into the world of small business. As you consider your options for your own startup, think about the benefit of moving ahead now – and getting ahead of the competition that will follow you when the economy improves.
Tomorrow’s topic: Developing a Support System to Help You Launch Your Startup