entrepreneur solutions playbook fedex

8/13/2019 Entrepreneur Solutions Playbook Fedex

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SOLUTIONSPLAYBOOKTop 25 Small-Business Challenges


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GETTING STARTED 4

Challenge 1: Deciding When to Ditch the Steady Job 5

Challenge 2: Finding the Time to Write a Business Plan 6

Challenge 3: Sharpening Your Elevator PitchAnd Your Business Plan 7

Challenge 4: Choosing Between an Incubator and an Accelerator 8

Challenge 5:Quitting Work for the Day When Youre the Boss 9

BRANDING/MARKETING 10

Challenge 6: Marketing a Product or Service Thats Ahead of its Time 11

Challenge 7: Making Social Media Tactical 12

Challenge 8: Deciding Whether to Embrace Mobile 13

Challenge 9: Calculating the Value of Media Placements 14

MONEY MATTERS 15

Challenge 10: Securing a Line of Credit 16

Challenge 11: Working with Investors 17

Challenge 12:Using Debt Financing to Build a Business 18

Challenge 13: Making the Most of Crowdfunding 19

Challenge 14: Deciding When to Start and Stop Fundraising 20

CONTENTS


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CONTENTSMANAGEMENT 21

Challenge 15:Protecting Intellectual Property 22

Challenge 16: Tackling Legal Paperwork 23

Challenge 17:Deciding Whether to Outsource IT 24

Challenge 18:Building a Product as You Build an Organization 25

STAFFING 26

Challenge 19: Choosing to Hire Employees or Contractors 27

Challenge 20:Competing for Top Talent Without Paying Top Dollar 28

Challenge 21:Creating a Culture of Excellence 29

Challenge 22:Building an Organization That People Are Excited to Join 30

Challenge 23: Weighing the Telecommuting/Team Building Tradeoffs 31

CLIENT RELATIONS 32

Challenge 24: Raising Prices Without Alienating Clients 33

Challenge 25:Sizing Up What to Invest in Client Face-Time 34


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GETTING STARTED |

GETTING

STARTEDChallenge 1:Deciding When to Ditch the Steady JobChallenge 2:Finding the Time to Write a Business Plan

Challenge 3:Sharpening Your Elevator PitchAnd Your Business Plan

Challenge 4: Choosing Between an Incubator and an Accelerator

Challenge 5:Quitting Work for the Day When Youre the Boss


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GETTING STARTED |

To some extent, leaving a steady job (and steadypaychecks) for the life of an entrepreneur is a leap offaith. Though you intend to make your startup succeed,nothing is certain.

Like any leap of faith, the process takes patience,confidence and a positive attitude. It also requires a goodidea of how you plan to manage expenses and support

yourself (or your family) until the new gig takes off.

That last question often proves to be the hardest toask and answer. If youve got money in the bank or aspouse whos still working, you probably are covered. Ifyou recently won a jackpot in Vegas, you probably aregood. If none of these scenarios is real for you, you needa bulletproof strategy for leveraging debt and investormoney long enough to sustain the company and your ownpersonal finances, too. Were not going to lie: This processcan be hairy at times. It also can be rife with uncertainty.

Travis Ness, co-founder of Renton, Wash.-based designagency Crossroads Creative, suggests that every forayinto entrepreneurship should be prefaced with someserious self-reflection in which business leaders askthemselves exactly what theyre comfortable handling onthe road to independence.

You need to weigh whether the freedom of successfullyworking for yourself outweighs the short-term instabilityor anxiety [you might have], he says.

The flipside of these question marks is, of course,the possibility of a smash hit. Yes, your current jobmay be steady, cushy and familiar. But when yourstartup succeeds, when youre the one at the helm of a

multimillion-dollar business, it isnt going to matter whereyou were before the current project. All that will matter iswhat you have accomplished.

SOLUTION:Besides getting yourself mentally ready for this adventureconsider thinking about what you need to have in placeto prevent unnecessary hardship for yourself andyour family.

CHALLENGE :Deciding When o Dich he Seady Job


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GETTING STARTED |

Weve all heard legends about entrepreneurs writing thecrux of their business plans on cocktail napkins at localwatering holes. (See Related: Five Businesses Born at aBar) While the backdrops and the implements may differin real life, the spontaneity usually doesnt.

Once you have that critical idea, however, business planstake lots of time and painstaking effort.

Some entrepreneurs have tackled the process solo. Thatwas the case for Amy Norman and Stella Ma, co-foundersof Little Passports, an educational products companybased in San Francisco. The duo wrote the bulk of theirplan while working for other companies, according toNorman. So they churned out most of the document onlaptop computers at their respective kitchen tables, onweekends and after everyone in their families had goneto sleep.

You find time to write it whenever you can, says Norman,looking back. Whatever it takes.

Other entrepreneurs, such as Jeff Platt, CEO and co-founder of the Sky Zone indoor entertainment venues,have brought in help.

When Platt and his father, his co-founder, realized thattheir business plan needed to incorporate a hefty amountof market research, the duo hired a consultant to scour

the Internet, record pertinent information about similarsports businesses, and imbue the document with context.

His involvement was bringing the industry expertise,says Platt, whose company has 30 locations nationwideand is based in Los Angeles. We knew that if we wantedto do this [plan] the right way, we wouldnt have time totackle that ourselves.

Even with the additional help, Platt says the planultimately took about 1,500 hours to complete.

SOLUTION:However you approach writing your business plan, be

prepared to put just about anything on hold to do it right.

CHALLENGE :Finding he Time o Wrie a Business Plan
http://www.entrepreneur.com/article/219834http://www.entrepreneur.com/article/219834http://www.entrepreneur.com/article/219834http://www.entrepreneur.com/article/219834http://www.entrepreneur.com/article/219834


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GETTING STARTED |

Think of an elevator pitch as your executive summary.Its the quick-and-dirty version of exactly what you wantpotential investors (and maybe even customers) to knowabout the business youre trying to build.

With this in mind, its critically important to draw uponcomponents of the elevator pitch to inform and round outa formal business plan.

Chris OLeary wrote the book Elevator Pitch Essentials(The Limb Press, 2008). He says a well-honed elevatorpitch should provide a business plan with a one-sentencesummary of what the business does, followed bystatements that explain

What the business does differently

How it adds value for customers

How it will make money

How it can scale over time

The point of an elevator pitch is to get conversationsstarted about your company, says OLeary, who is in St.Louis. While the elevator pitch provides quick hits on anumber of topics, the business plan should be designedto go more in-depth.

Credibility is another key part of an elevator pitch thatbelongs in a business plan.

OLeary thinks most entrepreneurs spend so much timeharping on the business itself that they ignore the need toexplain and enumerate their qualifications to make thatbusiness come to life.

At some point along the way, you need to answer thewhole question of Why you? he notes. You need togive people a very obvious reason to trust that you are the

right person to run this business over time.

To this end, OLeary adds that developing a solid elevatorpitch usually prompts entrepreneurs to start thinkingabout sales and marketing campaigns.

SOLUTION:Try out the above exercise in brevity. It can not only lead toa sharper and more credible business plan, but also pavethe way for overall business success.

CHALLENGE :Sharpening Your ElevaorPichAnd Your Business Plan


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GETTING STARTED |

Both incubator and accelerator models are designed tohelp entrepreneurs bring ideas to market. But dependingon what kind of help you wantand at what stage yourcompany sits currentlyone choice may make moresense for you.

As the name suggests, incubators are more nurturingenvironments, complete with advice from industry

experts, structured introductions to potential fundersand longer-term trajectories for idea development.Accelerators, on the other hand, offer quick pushes tohelp companies get over final hurdles and deliver theirproducts to market.

Some popular accelerators include Y Combinator andTechStars. Some popular incubators include Idealab andYouWeb.

Accelerators are set up to bring companies to market,

while incubators offer entrepreneurs more room to fail,explains Peter Relan, CEO and co-founder of YouWeb,which has California incubation locations. We makeinvestments in entrepreneurs,[accelerators] makeinvestments in business plans. (See Related Article:Meet the Entrepreneurs Behind the Booming Business ofGames.)

Another difference between the two is that incubatorsgenerally offer more resources.

Patrick McCarthy experienced this first-hand when he

co-founded ATRP Solutions, a specialty polymer companybased in Pittsburgh. McCarthy and his colleagues took thecompany through the Mellon Institute, an incubator tied

to Carnegie Mellon University. Perks included unlimiteduse of critical instrumentation that ultimately saved thefirm about $500,000.

To build a high-tech company, you have to be able toanalyze and characterize your chemicals, McCarthyexplains. We could have invested the money on ourown, but as part of the incubator we were able to use the

schools stuff and save our money for other things.

In exchange for all of this help, incubators andaccelerators alike usually require entrepreneurs to forkover a certain amount of equity. (In the case of ATRP, theuniversitys Technology Transfer Office holds a stake inthe firm.)

Some might think these additional fees are exorbitant.Others say they are small prices to pay for a chance to hitit big.

SOLUTION:Consider whether you need a nurturing environment tobetter form a business ideaor a place that will boost youto the next level. If you require the former, you likely will bemore successful going with the incubator. If you need thelatter, an accelerator might be better.

CHALLENGE :Choosing Beween anIncubaor and an Acceleraor
http://www.entrepreneur.com/article/219641http://www.entrepreneur.com/article/219641http://www.entrepreneur.com/article/219641http://www.entrepreneur.com/article/219641


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GETTING STARTED |

Its dangerously easy for entrepreneurs to view theirjobs as never-ending. So much to do! So little time! Withseemingly infinite demands, you might be tempted towork on your startup nonstop.

And while this strategy usually works for the first 72hours, it almost always leads to burnout pretty quicklyafter that.

Naturally, the key to managing your startup and your life isfinding out how the two fit together.

You need to put up boundaries, says Cali Yost, CEOand founder of Work+Life Fit, a Madison, N.J.-basedleadership-consulting firm. Take deliberate action in theareas that sustain your health, personal relationships,career networks, job skills and life maintenance, or theywont happen.

In describing the ultimate goal, Yost is careful not to usethe word balance, because she says, A 50-50 splitbetween work and life is never going to happen. Instead,she notes, entrepreneurs must realize that the interplaybetween work and life is a constant ebb and flow.

Jigar Mehta, director of operations at Matter, a fledglingmedia accelerator based in San Francisco, experiencedthis first-hand in 2012.

When Mehta joined the company, it was in majorbootstrap mode, and most of the executives logged

interminable days. Mehta says the work was invigorating.But after a while, he started to see it have an impact hisrelationships with friends and family.

Sooner or later, I realized something was missing,he remembers.

Applying structure to his days reversed this trend.

Currently, Mehta splits his days at lunch. He handles allphone calls before the break, and all meetings after.

Another strategy, as simple as it might seem, is makinglists. No matter how diligent you are, working until youvecrossed off five items from your list is a great way toquantify your efforts. Its also a good method to getstuff done.

SOLUTION:

As exciting as it is to start a company, adopt some rulesfor yourself to prevent it from consuming your entire life.Figure out what works best for you.

CHALLENGE :Quiting Work for he DayWhen Youre he Boss


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BRANDING/MARKETING |

BRANDING/MARKETINGChallenge 6:Marketing a Product or Service Thats Ahead of its Time

Challenge 7:Making Social Media Tactical

Challenge 8:Deciding Whether to Embrace Mobile

Challenge 9:Calculating the Value of Media Placements


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Entrepreneurs find this one of the most difficultchallenges in the current economic environment.

The first step in this process is to convince yourself.

Its important to find small, achievable steps youcan take to prove the concept -- then run with themto build momentum as you sharpen the idea, says

Matt Mickiewicz, founder of DeveloperAuction.com, adeveloper-recruiting web service based in San Francisco.

Trying to jump all the way to the final product is liketrying to build the Golden Gate Bridge from one end whilerunning across it, he says. Instead, start with a pier, thenbuild some pontoons out from the edges, then cobbletogether some wooden bridges across parts of the river.

The next step is to gather proof of concept.

According to Mickiewicz, this step involves collecting real-world data from real-world users about the product (orscaled-down versions of the product). What works? Whatdoesnt work? What features reign supreme? Gettinganswers to these questions will help demonstrate that theidea has merit.

The third step in persuading others your idea is viable is toremain flexible. Be willing to tweak product specificationsper feedback from focus-group users, or to rethink salesand distribution models based upon changes in themarketplace.

It also means being open-minded to failure andrecognizing that sometimes even the best ideas maynot work.

Finally, theres the art of timing.

If an idea truly is ahead of its time, then, by definition,its not viable yet. Whats more, current technology andpenetration have to be in line with how your product orservice is going to be used.

Imagine trying to launch YouTube when everyone was stil

on dial-up, Mickiewicz says. Sometimes a little contextgoes a long way.

SOLUTION:When it comes to convincing others about your idea,consider approaching it as a four-step process: Convinceyourself. Gather proof it works. Stay flexible about theidea. And think about the timing.

CHALLENGE :Markeing a Produc orService Thas Ahead of is Time


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Experts and entrepreneurs alike will tell you that socialmedia is all about the conversation. That means the keyto leveraging Facebook, Twitter and Instagram to youradvantage is controlling what peoplecustomers, usuallyare saying about you in virtual-but-public forums.

Content must be at the center of this effort, accordingto John Andrews, CEO and co-founder of Collective Bias,

a Bentonville, Ark.-based social shopper marketingcompany.

Andrews has found that companies can use keywords togame search engines into ranking certain pages higherthan others. Experts call the practice organic searchengine optimization (SEO).

If youre producing more content than anybody else, itspretty straightforward: Youll dominate the conversationevery time, Andrews says.

Promotions are another great way to make social mediatactical (As we learned in our Secret Sauce exercise in2011. See Related Articles: The Secret Sauce Project, TheSocial Media Challenge: The Results). Here, the caveat issimple: Youve to have a plan for what youre going to dowith all the people you gain from running a promotion.

Andrews says that because promotions in the world ofsocial media get instantaneous traction, its a good idea

to run two or three back-to-back to see which works best.Social media involves constant switch testing.

When it comes to leveraging social media into a weaponagainst competitors, the third and final key is to simplystay flexible. If one particular campaign isnt achievingthe desired number of followers or buzz, cut it off and trysomething new.

Media such as Facebook, Twitter and Instagram givebusinesses the opportunity to interact with customers inreal time; how businesses choose to wield that power isentirely up to them.

SOLUTION:To make your social media efforts more tactical, createcontent regularly and run promotions but stay flexible.

CHALLENGE :Making Social Media Tacical
http://www.entrepreneur.com/article/217862http://www.entrepreneur.com/article/217862http://www.entrepreneur.com/article/217862http://www.entrepreneur.com/article/217862http://www.entrepreneur.com/article/217862


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CTIA-The Wireless Association reports there are morethan 320 million mobile-phone subscribers in the U.Salone. So just about every business on earth needs tomaster and incorporate mobile technology if it is tosucceed.

Business development is about finding ways to helppeople find ways to spend time with your product

or service, says Greg Duffy, CEO and co-founder ofDropcam, a San Francisco-based company that makesWi-Fi video monitoring cameras. If people cant spendtime with your product or service on their phones, youremissing out.

In the olden daysyou know, the 1990sthe assumptionwas that companies had two opportunities to getcustomers to spend time with their products: at workor at home. Duffy thinks that mobile technologies havechanged the equation because they facilitate interactionsany time.

And in the world of mobile technology, quality trumpsquantityevery time.

Regardless of whether mobile technology companiesspecialize in software (read: apps) or hardware,businesses that excel in the field usually experience

overwhelmingly positive word-of-mouth chatter, whilethose that handle mobile poorly usually suffer fromnegative buzz.

This, adds Duffy, is reason enough to embrace mobile theright way.

People expect certain levels of service, he notes. Its

not just about doing it, but instead about doing it right.

All told, a good mobile strategy wont come cheap.Some entrepreneurs say its hard to build a good userexperience with design and programming for less than$100,000. Ultimately, such investments should pay hugereturns, especially if the mobile market continues to grow.

SOLUTION:Pursue a mobile strategy, when you can afford to do

it right.

CHALLENGE :Deciding Wheher o Embrace Mobile


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When applied tactically, media placementsadvertisements, advertorials and feature articlescan besuccessful components of a startups marketing strategy.

But its often difficult to quantify value and return oninvestment of these efforts.

One strategy is to survey customers on how they heard

about you. If customers are willing to respond to briefquestions after conducting business, they might revealthat they spotted your ad on their favorite website, or readabout your product or service in a magazine.

Another strategy is to offer special promotions availableonly in local media. At the end of each promotion, youshould be able to get a sense of revenue driven througheach specific channel.

The first thing is to be as small as you can until you find

what works for you, says Jim McCarthy, CEO of Goldstar,a ticket service based in Altadena, Calif. The second thingis to do everything you can to get results, even when itsdifficult to find out what happens.

Some entrepreneurs have opted to eschew paidadvertisements almost completely, instead focusing theirefforts on public relations.

Take pie bake shop founder Chris Porter as an example.Porter thinks advertising is a ripoff. Instead, he found

that a handful of newspaper and magazine articlesplayed a critical role in Seattle-based A la Mode Piesssuccessful launch. Without them, he notes, the four-year-old company likely would have stumbled disastrously outof the gate.

Overall, Porter warns that whichever media placementsentrepreneurs decide to adopt, the process of gaining

value from these efforts usually takes time.

It starts slowly, he says, noting that a little patiencegoes a long way. Every placement gets you morevisibility until you become established and [the collectivecoverage] legitimizes your business.

SOLUTION:Startups should consider more unique strategies whenit comes to media placements. Survey customers to findout whats working, perhaps stick to local, and maybeeven avoid paid advertising.

CHALLENGE :Calculaing he Value of Media Placemens


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MONEY MATTERS |

MONEYMATTERSChallenge 10:Securing a Line of Credit

Challenge 11:Working with Investors

Challenge 12:Using Debt Financing to Build a Business

Challenge 13:Making the Most of Crowdfunding

Challenge 14:Deciding When to Start and Stop Fundraising


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MONEY MATTERS |

Different types of banks dole out different lines ofcredit to different kinds of companies for a host ofdifferent reasons.

Among big banks, the name of the game isminimizing risk.

This means bankers generally shy away from early-stage

companies that havent yet tested ideas, and gravitatemore toward middle- and later-stage companies thathave been toiling for years to make a profit.

Corey Ross, co-founder of BBC Easy, a Seattle-basedcompany that automates borrowing, says a bank willusually consider lending to a company if it is at least threeyears old.

If you have three years of losses but can present a clearpath to success and how youre going to accomplish it,

thats the kind of situation a big bank will take, says Ross,who also spent part of his career working inside a bank.You need to demonstrate financial awareness.

Among smaller banks, theres more leeway forinterpretation.

Ross notes that bankers at many smaller and communitybanks will take the time to sit down with entrepreneurs

and try to flesh out specifics of their companys financialstory. Some of the questions they might ask include:

How did you get to where you are?

What struggles did you have to overcome?

What are you going to do with the money?

Smaller banks might know the people youre doing

business with, says Ross. In rare cases, these banks mayeven volunteer to act as liaisons or provide other servicesto help out.

Whichever approach you take, note that all banks thatdispense credit require extensive applications, as well asfinancial statements and tax returns for the duration ofthe companys history. Consider this due diligence.Its the least you can do for a little money to help getthings rolling.

SOLUTION:No matter what, be prepared to demonstrate a businesstrack recordas well as a persuasive case that the moneyyoure seeking will allow you to produce profits to pay thebank back.

CHALLENGE :Securing a Line of Credi


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MONEY MATTERS |

Building a company with the help of investors can be adouble-edged sword.

On one hand, a broad and diverse investment groupcan act as a brain trust that can help you and your co-founders navigate critical junctures (or even day-to-dayhurdles). Their passion, input and expertise can be just asvaluable as their money.

On the other hand corralling investors can be a bit likeherding cats -- especially if the investors are frustratedor arent clear about the companys direction and wantanswers, stat.

With this in mind, perhaps communication is the bestsecret to working with investment teams.

If your investors feel like youre giving them informationon the progress of the businessthe good progress and

the not-so-good progressthen they find themselves ina position where they can help, says Jeff Miller, CEO ofWheelz, a San Francisco-based peer-to-peer car-sharingcompany. Money is money. Your relationships with thesepeople are the things that are going to translate into acompetitive advantage down the road.

Still, there is such a thing as too much communicating.Miller, whose company has worked with about 25 differentinvestors over the years, says that when entrepreneurslook to investors for input on every move, problemsusually arise.

One definite no-no: kowtowing to investors who wantstatus reports once or twice a month.

You have to make sure that the cart is not driving thehorse, Miller says. As CEO, its your responsibility totake inputs and decide which course of action is best forthe business.

SOLUTION:Agree on ground rules upfront about the frequency andcontent of communications.

CHALLENGE :Working wih Invesors


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MONEY MATTERS |

Growing debt to build a business, also known as debtfinancing, is a valid counterpoint to the more traditionalroute of funding a startup with angel investors or venturecapital. Entrepreneurs who go this route say they do so asa way to retain equity and minimize new personalities onthe management team.

When you borrow on credit, you dont have to worry about

giving up portions of the company.

That said, playing with debt is always a risky proposition,especially when youve got to put up personal assets assecurity for the loan.

If you must grow debt to build the business, shy awayfrom credit cards (which often charge exorbitant ratesafter one year) and target banks that work with the SmallBusiness Administration. Thats because large portions ofSBA loans are guaranteed.

Heres another alternative: Seek debt financing fromcurrent investors.

This was the right strategy for Dan Meader, CEO and co-founder of San Diego-based Allowance Manager, whichmakes allowance-tracking software for parents. In 2011,almost two years after the company launched, Meadersaw cash flow sagging. He went to certain investors for alittle boost.

This guy who ended up lending to us already had a vestedinterest in our success and had bought into the promiseof the company, explains Meader. For him, it was low-risk. For us, it was an infusion that enabled us not to dilutethe interests of other shareholders.

Meader offered some other general tips for growingdebt wisely:

SOLUTION:

When financing growth with debt, look to minimize riskswhen it comes to your lenders and loan terms to thegreatest extent possible.

CHALLENGE :Using Deb Financing o Build a Business

Dont take out more money than youll need tofinance the company

Dont take on more debt than the available equityin the company; aim for a ratio of somewherebetween half and 1-to-1 of equity to debt

Dont stray from fixed-interest loans


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MONEY MATTERS |

President Barack Obama formally welcomed incrowdfunding as a startup-company revenue sourcewhen he signed the Jumpstart Our Business Startups Actin 2012.

This means its now legal for entrepreneurs to financeendeavors by pulling together donations from a multitudeof customers. The U.S. Securities and Exchange

Commission is cautioning companies not to offer equity inreturn for cash to the general public, but upcoming rulesfrom the agency will open the door for companies to seekinvestments from just about anyone. At the time of thiswriting, rules were expected to be issued some timein 2013.

Leveraging this platform to your advantage, however,takes gumption.

For starters, its important to take advantage of the speedwith which crowdfunding can deliver cash.

While traditional fundraising avenues such as angelinvestment and venture capital can take months,crowdfunding can work in a matter of weeks, says ZachDeAngelo, vice president of sales at Little Duck Organics,a New York-based company that got most of its firstround of funding through the San Francisco-basedcrowdfunding platform CircleUp.

You need money to survive, DeAngelo says. If thatmeans taking money from friends and family and here

and there, [you] do what it takes to allow your company tonot die.

Entrepreneurs can leverage crowdfunding platforms forother benefits, too.

First on the list is validation. If an entrepreneur isnt surehow big or popular his or her particular market mightbe, gauging the market size by interactions throughcrowdfunding could provide some valuable insight.

Next, theres the virtual focus group effect. In many cases,entrepreneurs will leverage a crowdfunding platform as away to test product design and marketing campaigns.

People spend thousands of dollars to go and get peoplesopinions in focus groups. You can do that for free withcrowdfunding, says Danae Ringelmann, co-founder ofIndiegogo, a crowdfunding platform also based in SanFrancisco.

Opinions shared during a focus group are just thatopinions, Ringelmann says. Crowdfunding offers a

window to understanding actual behaviors.

SOLUTION:

To do crowdfunding right, entrepreneurs must spendtime crafting a pitch and selling to their potential donorbase. It isnt a perfect product-testing ground but, in anenvironment where options previously were limited, thisnew approach is a welcome addition.

CHALLENGE :Making he Mos of Crowdfunding


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MONEY MATTERS |

Considering the open-ended nature of entrepreneurship,its perfectly normal to view fundraising as aSisyphean task.

Still, it pays to be specific when youre raising money tofinance a company with specific goals.

You need to go into VCs and say, With this amount of

money, we will build a product, says Gleb Budman, CEOof Backblaze, a data -backup service based in San Mateo,Calif. Or maybe the money is needed to secure a firstcustomeror prove customer acquisition.

Theres something wonderful about setting goals,meeting them and coming back with specific data on whythey should give you more, Budman says.

It also means being realistic about timetables. Budmanthinks it generally takes entrepreneurs an average of

three months from the time they start seeking fundinguntil an idea is funded.

To maintain control of the fundraising process, mostentrepreneurs first nurture relationships with venturecapitalists and other investors. Then they give the suitorsa deadline for submitting term sheets.

Obviously theres a risk that youll get nobody to give youa term sheet by that date, but if youve set your timeframerealistically, chances are youll do well, Budman says.

One last piece of advice: When it comes to fund raising,more isnt always better.

Some entrepreneurs often think if the money is cheap

that is, if investors are falling over themselves to fork itoverthe smart play is taking whatever you can get. Dontget caught in this trap. The more money you raise fromoutside sources, the more you dilute ownership of theconcept. Yes, you want to make your vision a reality. Butyou also want to keep it yours.

SOLUTION:The best strategy involves establishing a very modestseries of funding goals, recognizing when you haveachieved those goals to the best of your ability, and thenpulling back on fundraising efforts to execute the plan.

CHALLENGE :Deciding When o Sar and Sop Fundraising


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MANAGEMENT |

MANAGEMENT

Challenge 15:Protecting Intellectual Property

Challenge 16: Tackling Legal Paperwork

Challenge 17:Deciding Whether to Outsource IT

Challenge 18:Building a Product as You Build an Organization


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MANAGEMENT |

Technically speaking, there are three main ways to protectintellectual property (IP) in todays business environment:trademarks, copyrights and patents.

The first two are important but not overwhelmingly so.Common law in most states affords entrepreneurs acertain degree of trademark and copyright protection justfrom using their brands. (Entrepreneurs, though, cannot

recoup money beyond damages under case law.)

Patents, on the other hand, can be critical -- especiallyin industries where products are based on proprietaryresearch. Patents legally protect you from competitorsswooping in and stealing ideas.

In order to get a patent, you must register specificideas with the U.S. Patent Office. The process is tedious,involves many hours of lawyer time and can often stretchout over four or five years, says Mike Masnick, CEO andfounder of Floor64, a Sunnyvale, Calif.-based media andconsulting company.

Entrepreneurs need to ask themselves if the protectionoffered by patents is worth all of the time and money youneed to protect them, says Masnick, who has presented

in front of the European Union parliament on IP andhas written extensively about the subject over the pastfew years.

Masnick offers an alternative approach to protecting IP:building something successful.

His advice: Even if youre not protecting IP under the law,

being first or being best in the market is often the bestprotection entrepreneurs have against copycats.

If you offer the best solution in the marketplace, even ifsomeone copies you, people will recognize that you ledthe way and follow you for that, he says. In this way,the business world operates no differently from the wayindividuals do. Leaders, not followers, are the ones whodrive everything.

SOLUTION:If you lack the time and money to apply for patents, asmost startups do, your best protection against IP theft isto stay ahead of the competition.

CHALLENGE :Proecing Inellecual Propery


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MANAGEMENT |

Depending on whom you ask, there are literally dozens oflegal documents that entrepreneurs should line up beforethey jump head-first into a new venture. Some, however,are more important than others.

First, its critical to consult a lawyer about properlydocumenting the businesss formation. This processinvolves choosing an optimal corporate entity, then

forming and registering that entity. It also requiresdrafting an operating agreement and constitutionaldocuments to clarify the structure, function and operationof the venture.

Next, lawyers can help startups protect intellectualproperty with customized licensing and technologytransfer agreements for third parties and vendors.

Its also necessary to have an airtight nondisclosureagreement to ensure protection when disclosing ideas toangel investors, venture capital funds, employeesandeven programmers and vendors.

Then, of course, theres the issue of equity structure. SaiPidatala, a corporate-law attorney in Washington, D.C.,notes that companies usually need lawyers todraft vesting clauses to ensure that company stock isvested only after a certain amount of time or aftercertain benchmarks.

This ensures that a founder doesnt leave immediatelyand cant retain ownership in a company for which he isno longer toiling, Pidatala says.

If you think you cant afford all of this legal work,think again.

The law firm Orrick offers a set of templatesfor startups

to follow to tackle some of these forms on their own.(Though, its generally a good idea to retain the servicesof an attorney to make sure the forms are filled outproperly.)

Whats more, a number of business law firms, includingOrrick and Gunderson Dettmer, are open to compensationmodels through which startups can postpone payment forup to one year.

SOLUTION:Time and money may be tight, but skip your getting yourlegal documents in order only at your own risk.

CHALLENGE :Tackling Legal Paperwork
http://www.orrick.com/practices/corporate/emergingCompanies/startup/forms_index.asphttp://www.orrick.com/practices/corporate/emergingCompanies/startup/forms_index.asphttp://www.orrick.com/practices/corporate/emergingCompanies/startup/forms_index.asp


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MANAGEMENT |

Fighting simply to survive, many startup owners findit daunting to manage hardware, software and otheraspects of information technology.

Sure, small companies can tackle these issues in-house,but finding the right person for the job can be bothtime-consuming and expensive, especially in competitive

markets such as Silicon Valley.

For this reason, entrepreneurs may want to outsourcetheir IT needs.

Were not talking here about farming work overseas.Instead, were talking about hiring a technology servicescompany to come in and manage certain aspects of astartups computing environment. Depending on thebusiness segmentand the size of the company itselfthis approach generally is less expensive than hiring a

dedicated IT pro.

The strategy usually works best for companies with lessthan 50 employees, says Bill Cox, president of SonomaComputer Products, a Santa Rosa, Calif.-based IT-consulting company. When a company surpasses50 workers, the scenario typically requires too muchdesktop support.

Cox also notes that most outsourcing arrangementsdeliver a broader range of expertise than in-house hires.

Startups may rely on an in-house programmer orengineer to manage their network part time while alsojuggling the skills they were actually hired for, he says.Outside firms often have multiple engineers on staff to

supply experienced support across a range of IT skills:server management, networking equipment, mobiledevice integration and things like this.

Of course there are exceptions to this approach. If abusiness uses specialized equipment to interface withthe network, or employs unique applications, or operatesin high-security computing environments, insourcingmight be a better option long-term.

Whichever option you select, remember this: Its easier to

move from in-house to outsourced, than the other wayaround.

SOLUTION:Most business owners may want to consider hiringa technology-services company once they meet the50-employee mark.

CHALLENGE :Deciding Wheher o Ousource IT


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MANAGEMENT |

Even the most skilled entrepreneurs can juggle only afinite number of responsibilities at one time. Thats whythe ability to delegate is critical when grappling with theHerculean tasks of building a product and organizationsimultaneously.

Put differently, you need to know what youre bad at.

Maybe youre technically excellent but youre not amarketer, or [youre] a showman and a visionary butcommercially lacking. Maybe your product marketinginstincts are great, but your people management skillsarent that strong, says Dave Slutzkin, founding CEO ofSan Francisco-based website-auction service Flippa.com.

You need to know yourself honestly so you can bestshape the organization to fill the gaps, Slutzkin says.

The way Slutzkin sees it, a product always is shaped bythe organization that creates it.

So if youve hired 15 developers but no user experts,youre going to end up with something technically geniusthat users dislike. On the other hand, if youve got a strongdesigner but weak developers, youll end up with a prettyproduct that fails to work consistently.

You need to get the right balance across the team,Slutzkin says. This balance is the key to everything.

Theres one responsibility that entrepreneurs never shdelegate when starting out: product quality. Becauseevery product your organization puts out will bear youname, its important that you single-handedly make squality stays consistent throughout the process.

Ultimately, you can delegate quality control to the teabut only after your company has leveraged productsuccess to establish a reputation. Until then, considerone of your most critical tasksboth for the companyimmediate success and for continued success downthe road.

SOLUTION:The overall goal here is use organization-building to

create a better productas well as a better entrepren

CHALLENGE :Building a Produc as You Buildan Organizaion


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STAFFING |

STAFFING

Challenge 19: Choosing to Hire Employees or Contractors

Challenge 20: Competing for Top Talent Without Paying Top Dollar

Challenge 21: Creating a Culture of Excellence

Challenge 22: Building an Organization That People Are Excited to Join

Challenge 23:Weighing the Telecommuting/Team Building Tradeoffs


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STAFFING |

Building a business of independent contractorsaka1099s, after the IRS form you send themcertainly hasits benefits. The 1099 tax form reports the amount paidfor services to noncorporate independent contractors.

For starters, hiring these workers translates into loweroverhead, since freelancers dont require office space,benefit packages or other perks associated with full-

time employment.

Employers who hire these workers also arent requiredto withhold income taxes, Medicare and Social Securityon the workers behalfrealities that translate intooperational savings across the board.

When it comes to 1099s, theyre even are more scalable:You hire more of them during a high tide of work and hirefewer of them when business is slow.

But there are downsides to hiring these types ofworkers, too.

Kevin Hartz, CEO and co-founder of San Francisco-basedevent-promotion service Eventbrite, says that manyentrepreneurs are looking to develop a corporate cultureat their startups, and this culture starts with employeeswho are invested emotionally and financially in thecompanys success.

To 1099 people means you dont value them as ownersand partners in the business. You just seem them ashired guns, he says. You 1099 a service provider like aconsulting shop, not the team members you want to workhard for you and help you build the next great thing.

Another downside to independent contractors is that theyput their own interests above those of the company as a

whole. Its their very nature.

Finally, of course, theres the risk of misclassificationinthe eyes of the IRS.

Ward Ozaeta, president and CEO at San Diego-based6 Degrees Realty Capital, suspects companies couldbe on the hook if they erroneously label independentcontractors as employees. The contractor might seekunemployment insurance after his or her contract ends.This would open up the company to scrutiny from the taxcourt, including unnecessary investigations, tax auditsand even lawsuits, Ozaeta said.

SOLUTION:The bottom line is: when opting to staff your startup,choose wisely.

CHALLENGE :Choosing o Hire Employees or Conracors
http://www.irs.gov/pub/irs-pdf/f1099msc.pdfhttp://www.irs.gov/Businesses/Small-Businesses-&-Self-Employedhttp://www.irs.gov/Businesses/Small-Businesses-&-Self-Employedhttp://www.irs.gov/pub/irs-pdf/f1099msc.pdf


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STAFFING |

Dollar-for-dollar, theres almost no way small startupscan compete with huge companies for talent in thenations hottest job markets.

For this reason, its important to supplement competitivesalaries with a host of other perks.

Stock compensation usually is a huge part of these

packages, giving employees more and more equity inthe company the longer they work. Its an additionalnonmonetary benefit that can truly provide one-of-a-kindopportunities for employees.

If you go to a smaller company youre much more likelyto be working on a critical product or key campaign,says Andy Kurtzig, CEO and founder of San Francisco-based online professional-services company Pearl.com.Knowing that youre really making a huge impact on youremployer and its ability to be successful makes it fun tocome to work every day.

Many smaller companies also compete against the bigboys for talent by offering flexibility.

Kurtzig notes that one of the senior execs at Pearl.comis a single mom with two young children and says thecompany has worked with her to create a flexible schedulein which she drives in early and leaves early enough toskip most of the evening traffic and be home in timefor dinner.

Finally, a number of startups across the U.S. have beenknown to sweeten job offers with peripheral perks thatlarger companies simply cant match.

For instance, crowdsourcing design service 99designs inSan Francisco gives most employees the opportunity tospend time in the companys Australia office. Employeesreceive four weeks of vacation time annually as opposed

to the standard going rate of two.

We are trying to keep parity between the perks for ourAustralian and European employees and the perks for ouremployees here, says CEO Patrick Llewellyn. Add theseperks to a good salary, fun culture, and coffee and beer inthe office at all times, and this is a pretty great placeto work.

SOLUTION:Consider stock compensation, flexible schedules and workenvironments and unique perks as you try to hire hard-to-secure talent.

CHALLENGE :Compeing for Top TalenWihou Paying Top Dollar


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STAFFING |

Its one thing for your business to be successful. Itsentirely different to approach day-to-day operations witha culture of excellence.

In the former scenario, satisfaction is achieved throughprofitability and growth. In the latter one, satisfactionis more of an elusive ideal, something you (and youremployees) are chasing inexorably.

Laura DePasquale knows all about the commitmentrequired to achieve excellence. Shes one of only 18female master sommeliers in North America. Shes vicepresident and general manager for the Florida divisionof Stacole Fine Wines -- a wine wholesaler and importerthats part of Ashland, Virginia-based The Vintner Group.

DePasquale spent the better part of a decade studyingto become an expert in her craft. Over the years she hastried to instill in employees an appreciation for the work.

Im never satisfied, DePasquale says. She notes thatafter every big project, its important to have a post-mortem to discuss what we did well and what theopportunities for improvement are which includes thegoal setting, direction and execution of the project.

Whats more, DePasquale notes that she and her teamcontinue to push education, requiring all salespeople tobone up on fine wines and wine regions of opportunity.

They even make an effort to educate customers.

By providing the highest level of wine education, weultimately shine a spotlight on the excellence of our wineand spirits portfolio, DePasquale says.

In general, other strategies for creating a culture ofexcellence include regular powwows to share best

practices, intermittent performance exams, regular jobreviews (with suggestions for the future) and clear careertrajectories so employees have promotions for whichto strive.

Amid all of this intense focus, its also a good idea toinstitutionalize levity. Group retreats, free meals andseasonal parties help employees stay motivated. Theyalso guarantee fun.

SOLUTION:Consider asking yourself how driven you are with yourbusiness, and whether you are promoting a culture ofexcellence.

CHALLENGE :Creaing a Culure of Excellence


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STAFFING |

Great places to work are built on a triumvirate ofchallenging work, generous benefits and day-to-dayrelationships that employees experience while on the job.

Assuming that the all-hands-on-deck approach towork at a startup is inherently challenging, this meansentrepreneurs must focus on the latter two if they wish tocreate an organization that people are excited to join.

Engineering extraordinary programs is relativelystraightforward. Anything that goes beyond the baselinein a companys home market will stand out. While moststartups dont have money for free meal programs likethose at Google, they might be able to afford one freemeal a week, or similar perks such as good coffee andfree beer.

Stellar benefit packages also go above and beyond thecurrent norms. Medical, dental and vision coverage isstandard. Additional days off and on-site childcare are anobvious upgrade.

Arguably the toughest of these tasks involves fosteringfulfilling day-to-day relationships.

Such a perk pertains to employees feeling that theyare being treated fairly and that they own responsibilityat work, says Barbara Curran, chief financial officer atSeattle-based online furniture retailer Curran Online.

Short communication channels that enable issues tobe addressed quickly are a must, she says. The lessbureaucratic an organization is, the more excited peopleare to work there.

Of course there are other ways to create an organizationpeople are excited to join.

Curran notes that a pleasant visual workspace isimportant, since employees spend anywhere from eight to12 hours working each day.

Another key factor is salary. While employees mayprioritize non-monetary benefits as important reasons fortaking a new job, competitive compensation is importantfrom a practical perspective, and should notbe overlooked.

SOLUTION:

Consider asking yourself whether your own business is aplace you would want to work ateven if you didnt ownitand improve the workplace perks and communicationenvironment accordingly.

CHALLENGE :Building an OrganizaionTha People Are Excied o Join


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STAFFING |

Theres no question that a work force of remote workerstranslates into lower overhead for the mother ship.

Nearly a third of roughly 7.4 million businesses acrossthe U.S. already allowtelecommuting, according to thenonprofit Connected Nation. And a studysponsored byonline meetings company Citrix Online suggests nearlyhalf of the jobs in the U.S. could be suitable for full-time

or part-time telecommuting.

Still, just because working remotely is an economicaloption in general doesnt mean its a strategy worthimplementing across the board.

For startups, the challenges with this approach aretwofold.

First, having workers spread across disparate work sitescan impact creativity in a bad way. While technologies

such as Google Hangout and Skype have helped bridgethese gaps, theres no substitute for the creativity thatemerges spontaneously from face-to-face brainstormingsessions and other physical get-togethers.

(Some allege that body languageis a big part of thatcreativity, and this kind of nonverbal communication islost when peering through a webcam.)

Second, if youre looking to build a company that isviable for acquisition, having workers spread all over

the place could become a bugaboo when its time tocrunch numbers.

Jay Levy, a founding partner of New York-based ZelkovaVentures, says acquiring companies typically wantacquisition targets to have employees in one placebecause it makes it easier to absorb them.

Some firms wont do a deal until all of the employeesfor the acquisition company are centralized, says Levy,who also co-founded a Napa, Calif.-based startup namedUproot Wine.

Levy adds that perhaps the best approach is a hybrid,with a bulk of workers in a headquarters location and ahandful of contractors who work remotely and come in formeetings from time to time.

Above all else, he notes, flexibility is key.

SOLUTION:While telecommuting has advantages, it also makessense to have many of your workers operating out of thesame location -- at least some of the time.

CHALLENGE :Weighing he Telecommuing/TeamBuilding Tradeoffs
http://www.connectednation.org/sites/default/files/cn_biz_whitepaper2012_final.pdfhttp://www.workshifting.com/downloads/downloads/Telework-Trends-US.pdfhttp://smartblogs.com/leadership/2011/07/13/the-body-language-of-collaboration/http://smartblogs.com/leadership/2011/07/13/the-body-language-of-collaboration/http://www.workshifting.com/downloads/downloads/Telework-Trends-US.pdfhttp://www.connectednation.org/sites/default/files/cn_biz_whitepaper2012_final.pdf


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CLIENT RELATIONS |

CLIENTRELATIONSChallenge 24:Raising Prices Without Alienating Clients

Challenge 25:Sizing Up What to Invest in Client Face-Time


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CLIENT RELATIONS |

Theres no way to sugarcoat it: Raising rates is one of thebiggest challenges for a business owner. You dont wantto cut off the proverbial hand thats feeding you. At thesame time, you need to maintain a positive cash flow andgrow for the future.

For Mark Morse, CEO of Minneapolis-based brandingagency Morsekode, the best strategy is to communicate

about impending changes, and be as transparent aspossible.

As there is a need to elevate prices, you go to keycustomers and let them know, he says.

Transparency could mean explaining to the client thathealth premiums are creating heavy cost pressures.Or maybe the price of video equipment the companyuses is going up. So many people forget that financialdiscussions are normal part of a relationship, Morse says.

One of the ways that Morse communicates withhis customers is by inviting them to individual andindependent quarterly review sessions. During thesemeetings, Morse and his colleagues share informationabout everything from new technologies and new hires topotential price increases on the horizon.

Morsekode usually gives clients ample warning aboutthese price hikes, if for no other reason than to make suretheyre in the know.

Thats a key part of deliveryno surprises, says Morse.

Another strategy for communicating with clients aboutpricing is to show them whats under the hood ofcurrent pricing structure at every step of the way.

Some companies do this with regular newslettersthat subtly (and sometimes not so subtly) explain the

overhead and processes that drive the retail price ofproducts and services. Others utilize social media to letcustomers know why the company is growing, how thecompany is doing it, and what rate increases truly meanfor them.

SOLUTION:Customers dont have to be happy about price bump-ups.They just have to accept them. Openness and honesty canmake this process easier for everyone involved.

CHALLENGE :Raising Prices Wihou Alienaing Cliens


34/35

CLIENT RELATIONS |

Face-to-face meetings arent mission-critical, but theycertainly can make a big difference in client relations.

Just ask Heather Stouffer, founder of Alexandria, Va.-based organic-foods company Mom Made Foods. Stoufferonce flew 10 hours round trip to have eight minutes infront of a prospective client -- the very same client who

agreed to sign with Mom Made because she trusted them.

I think [success is] just about really being sincere,trying to be yourself and telling your story, she says.Storytelling in person is really important. We arepassionate and sincere [about our story] and we [tell] itbest when we are face-to-face.

According to Stouffer, in-person meetings are even moreimportant early in the relationship with a new client.

Because your clients have no experience working with you,she says, the face-to-face becomes an important part ofmaking those clients comfortable. Even though youreselling a product, theyre really buying you, Stouffer says.

Of course in-person get-togethers arent always practical.Especially when money is tight, investing hundreds ofdollars for every eight minute meeting isnt sustainableover time.

The key is to choose your client meetings wisely. Whendeciding, always weigh the potential monetary and non-monetary expenses of engineering a face-to-face visitwith the potential monetary and non-monetary rewards.

On those occasions when you figure it isnt importantto meet clients in person, embrace technology-driven

options such as videoconferencing, Google Hangoutsand Skype.

Anything that makes the experience more personal isgoing to end up benefiting you in the end, says Jay Levy,a founding partner of New York-based Zelkova Ventures.Convenience is important, but business relationships arestill about personal connections.

SOLUTION:Figure out a way to get at least some kind of face-to-

face interaction with clients, especially when youre juststarting to work with them.

CHALLENGE :Sizing Up Wha o Inves in Clien Face-Time


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M

att Villano is a freelance writer

and editor in Healdsburg, Calif.

He is a regular contributor to

Entrepreneur, and has covered startups and

entrepreneurship for The New York Times, TIME

and CIO. He also covers a variety of other topics,

including travel, parenting, education and

seriously gambling. He can be found on his

personal website, Whalehead.com, and on

Twitter @mattvillano.
http://www.whalehead.com/http://www.twitter.com/mattvillanohttp://www.twitter.com/mattvillanohttp://www.whalehead.com/

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