Starting Your Own Internet BusinessStarting Your Own Internet Business

Donald E. Chase, PartnerDonald@LoudOffice.com

http://www.LoudOffice.com/Class/Business/

A LoudOffice.com Workshop

Step One: Understanding You Step One: Understanding You and Your Opportunityand Your Opportunity

Before Starting Any Business:Before Starting Any Business:

Are You an Entrepreneur?What is Your Idea?Who is Your Team?Who is Your Customer?How Do You Reach & Convert Them?Do You Have the Resources?Are You Ready?

Are You an Entrepreneur?Are You an Entrepreneur?

How do you define an entrepreneur?What qualities does an entrepreneur

have?What entrepreneurial qualities do you

have?What areas do you need to improve on?

Reality Check!?!Reality Check!?!

10 Questions You Must Ask Yourself:1. Are You Passionate?2. Are You Self-Confident?3. Are You a High-Energy Person?4. Are You Competitive?5. Are You a Leader?6. Are You Organized? 7. Are You a Good Communicator?8. Are You a Risk Taker?9. Do You Have Buy-In?10.Are You Ready?

Your IdeaYour Idea

Where does your vision comefrom?– Your personal goals– Your prior work experiences– A problem you’ve solved– Dumb luck– An improvement of someone else’s idea

Take a few minutes to write a personal vision statement.

Evaluating Your IdeaEvaluating Your Idea

Can you clearly articulate your vision?Do you know the industry?What PROBLEM does your idea solve?Is your solution better?Can you protect your idea? Is your idea yours?Can you make money from your idea?

Your TeamYour Team

Unless you are a “Jack of All Trades”, chances are your business could probably benefit by having a well-rounded team assist you in your business.

Your Team (Cont.)Your Team (Cont.)

If you are going to look for financing, most investors will want to see a solid, experienced, and professional team in place.

Some gaps are normal, but you should never expect to get financing for a large-scale business all on your own.

Understanding Your MarketUnderstanding Your Market

Know Your Industry.Gather Data on Your Market.Talk to Prospective Customers.Research The Competition.Test Your Product.Determine Your Pricing Strategy.Is There a Niche You Can Fill?

Understanding Your CustomerUnderstanding Your Customer

Who is your core customer? What does your customer care about? Can you solve a problem? How is your customer addressing that problem

right now? How do you solve that problem in a unique way? How big is the market for the problem you are

trying to solve? How much are people willing to pay for it?

What Are Your Resources?What Are Your Resources?

Prepare a personal financial statement.What assets do you currently have?Can you raise additional capital?

– The 3 Fs: Friends, Family, & Fools?– Traditional Bank Financing?– Investment Capital?

Other than cash, what resources do you need and can you meet these?– Materials, talent, intellect, etc.

Sizing Up The OpportunitySizing Up The Opportunity

TheIdea

TheResources

TheTeam

If you have a good balance, you should have an attractive opportunity.

Your Opportunity ChecklistYour Opportunity Checklist

Does the idea translate into a product or service?

Is it a product that consumer’s want? Can product attributes be

communicated so that customers know they want it?

Can the product be developed today?

Opportunity Checklist (Cont.)Opportunity Checklist (Cont.)

5. Will the product be better or cheaper than competitors?

6. Is the “window of opportunity” opening?

7. Are you the right lead entrepreneur?8. Do you have a strong team?9. Do you have or can you get the

resources?

The Three MsThe Three Ms

Market Demand– Customers are there.

Market Size & Structure – There is a large enough market for you to

break into.Margin Analysis

– You can be profitable.

Step Two: Business BasicsStep Two: Business Basics

Choosing and Registering A NameChoosing and Registering A Name

Unless you are doing business under your own name, you will need a business certificate which is normally filed with your local city or town hall.

Corporations (and LLPs & LLCs) need to file with the Secretary of State (One Asburton Place, Boston).

Patents and Trade NamesPatents and Trade Names

You can check for patents and trademarks online.

If your name is or could be valuable, you are well advised to register a trademark for your name.

How to Structure Your BusinessHow to Structure Your Business

See Starting a Business in Mass. (pg 12)– Sole Proprietorship– Partnership– A Corporation

• S Corporation (quasi-corporation)• C Corporation (“normal” corporation)

– Limited Liability Company– Limited Liability Partnership

State & Federal TaxesState & Federal Taxes

If your business is a partnership, corporation, or sole proprietorship with employees, you will need a federal identification number (Form SS4).

Mass. D.O.R. requires you to register if you have employees or collect certain fees or taxes (see page 21).

Employer TaxesEmployer Taxes

If you have employees, you will need to be aware of the following taxes:– Federal & State Income Tax– Unemployment Insurance– Workers’ Compensation– Payroll Taxes– Etc. Ad Nauseum

Massachusetts requires you to report all employees w/i 30 days of hire.

The Importance of CASH FLOWS!The Importance of CASH FLOWS!

Cash flow is the difference between the movement of money into and out of your business over a period of time.

Even if you are making money, you could have negative cash flows.

Without cash, your business is dead.

Cash Flow LingoCash Flow Lingo

Cash Inflows– Owner Investments– Cash Sales– Payments on

Receivables– Interest Dividends– Other

Cash Outflows– Cash expenses– Payments on

accounts– Owner withdrawals– Interest Payments– Other

Starting Cash + Cash In – Cash Out = Ending Cash

How Much Cash Will You Need?How Much Cash Will You Need?

The total cash you need includes what it’ll take to start the business, run the business for 3 months, and keep you from going hungry:– Initial Setup Costs– Business Operating Costs (90 Days)– Personal Living Expenses (90 Days)

See “Estimating Cost of Startup” Handout.

SHOW ME THE MONEY!!!!!!!!SHOW ME THE MONEY!!!!!!!!

How Much Financing the Inc. 500 Used:

Starting Capital % of the Inc. 500

Less than $5,000 25%

Less than $25,000 50%

Less than $100,000 75%

More than $1,000,000 5%

Where to Get FinancingWhere to Get Financing

Personal FundsPersonal Borrowing

– Personal Loans, Mortgages & Credit CardsFamily & FriendsBanksSmall Business AdministrationAngel Investors & Venture Capitalists

Bank LendingBank Lending

Banks are a great source of money if you don’t need any.

Banks don’t like risk. Banks rely on

collateralization. Banks cannot

collateralize technology.

The Small Business AdministrationThe Small Business Administration

Started in 1953 to provide government loans and serve as an advocate for small business concerns.

The SBA does not make loans, it only guarantees loans.

Last year the SBA approved more than $12 billion loans to more than 1 million small business owners.

SBA PositivesSBA Positives

Loan approval based on SBA Guarantee Faster- SBA has implemented three programs

to speed up transaction times– Low Doc for loans less than $150,000– SBA Express– PreQualification Programs

Better Terms– 5 to 10 years for Capital / 25 years for R.E.– SBA caps interest rate that commercial bank can

charge

SBA NegativesSBA Negatives

Collateral requirements are strict and personal guarantees are expected in many cases

Paperwork can be voluminous depending upon the size and type of loan

Double review requirements from local bank followed by SBA adds to processing time on certain loans

SBA Loan ProgramsSBA Loan Programs

The 7(a) Loan Guaranty Program– SBA's primary loan program.– SBA reduces risk to lenders by

guaranteeing portion of loan.– Enables lenders to provide financing to

small businesses when funding is otherwise unavailable on reasonable terms.

SBA Programs (Cont.)SBA Programs (Cont.)

SBA LowDoc Program– For loans up to $150,000– Offers a simple, one-page SBA application form.– SBA guarantees up to 80 percent of the loan

amount.– Usually processed within two or three business

days.– Business start-ups, as well as businesses with

average annual sales for the past three years not exceeding $5 million and with 100 or fewer employees, including affiliates, are eligible.

SBA Programs (Cont.)SBA Programs (Cont.)

7M-Microloan Program– Micro-loans of $100 to $25,000.– Provided directly by a network of intermediaries

approved by the SBA.– Can be used for the purchase of machinery,

equipment, furniture, fixtures, inventory and working capital.

– Most small businesses that are unable to obtain funding through conventional sources or the other SBA guaranteed loan programs should contact the microloan lenders in their area.

Angel InvestorsAngel Investors

Angel Investors are wealthy individuals (often successful entrepreneurs) who like to invest in early stage companies.

Typical Angel investments run from $10K to $500K.

Venture CapitalVenture Capital

Venture capitalists generally:– Finance new and rapidly

growing companies; – Purchase equity securities; – Assist in the development of

new products or services; – Add value to the company

through active participation; – Take higher risks with the

expectation of higher rewards; – Have a long-term orientation.

Watch Out!Watch Out!

Remember, for every one deal an Angel or VC is successful with, another 3-5 FAIL.

You will have to give up control and ownership interest in order to attract funding.

There is such a thing as “Smart” money.

Writing a Business PlanWriting a Business Plan

Business plans are a requirement if you need to get any type of financing, but they

also serve as a great tool to help an entrepreneur focus on what they want

their business to become, and how they intend to get there.

Your Business PlanYour Business Plan

Your business plan is a road map that shows you, your employees, and investors how you will take your business from Point A ($0) to Point B ($1,000,000).

Why Write a Business PlanWhy Write a Business Plan

1. To Sell Yourself on The Business

2. To Obtain Bank Financing

3. To Seek Investment Funding

4. To Arrange Strategic Alliances

5. To Obtain Large Contracts

6. To Attract Key Employees

7. To Complete Mergers and Acquisition

8. To Give Your Business a Focus

Types of Business PlansTypes of Business Plans

Summary Business Plans– 10 pages or less, normally to attract bank

financing or provide some focus.Full Business Plan

– 10 – 40 pages, normally to attract investment, alliance, or M&A.

Operational Business Plan– 40 – 100+ pages, normally very detailed.

Business Plan ContentsBusiness Plan Contents

Table of Contents Executive Summary Description of

Company Management Product / Service Market Analysis Marketing Plan

Competition Operating Plan Financial Plan Risks Benchmarks /

Milestones Appendix

Preparing a Business Plan “Pitch”Preparing a Business Plan “Pitch”

Company overviewand elevator pitch;

Mission Stmt.

Problem Buy-in;Opportunity;

3Ms

Your solutionand products;with benefits

More solutiondetails

Technologies CompetitionEntry Strategy;

Growth Strategy;Mkting Strategy

TeamStatus;

Timeline;Use of Funds

Recap; Call-to-action

1 Title;Speaker Intro

How much youneed

2 3 4

5 6 7 8

9 10 11 12Business Model;Revenue DriversCost Drivers

Where to Go For HelpWhere to Go For Help

Mass. Small Business Development CenterBoston College142 Beacon StreetChestnut Hill, MA 02167617-552-4091

Small Business Administration10 Causeway Street, 2nd FL Rm 265Boston, MA 02222617-565-5590

SCORE (Service Core of Retired Executives)617-565-5591

Mass. Office of Business Mass. Office of Business Development (MOBD)Development (MOBD) Mission is to assist in the creation and

preservation of jobs in Massachusetts.

Assists current and potential businesses in areas such as financing, tax incentive, site selection, and more.

Partners with local Small Business Development Centers.

Finance and Tax IncentivesFinance and Tax Incentives

Bond Financing Program & Equipment Financing Programs.

Emerging Technology Fund.Export Finance Programs.Predevelopment Assistance Program.Capital Access Program.

How to Contact the MOBDHow to Contact the MOBD

Online: http://www.state.ma.us/mobd/Address:

10 Park Plaza, Suite 3720Boston, MA 02116

Phone: (617) 973-8686Fax: (617) 973-8797

Starting Out On the Right FootStarting Out On the Right Foot

Be mentally prepared to give it 100%. Be prepared to sell yourself. Be single-minded in getting your first

customers. Keep your business model easy to

understand. Don’t expect financial miracles on day one. Be prepared for the unexpected.

Run Your Business Like a BusinessRun Your Business Like a Business

Plan your efforts carefully.Focus on service first, flash last.Keep track of everything (in writing).Use credit wisely, extend credit more

wisely.Systematize all of your operations.Know your numbers.

Step Three: It’s eBusiness, Baby!Step Three: It’s eBusiness, Baby!

Some PerspectiveSome Perspective

Microsoft Corporation, 1978

Donald’s Golden Rule of eBusinessDonald’s Golden Rule of eBusiness

Repeat After Me:

“eBusiness is Business”

“eBusiness is Business”

“eBusiness is Business”

The Internet is Just a Tool, It’s What YouDo With It That Makes it Special!!!

The Role of Technology in The Role of Technology in BusinessBusiness

Misconception - No Value Created!!!

Strategy

BusinessChange

BusinessChange

BusinessValue

BusinessValue

Technology

Creates

Drives

Directs

Yields

New Business ModelsNew Business Models

YesterdayYesterday

BusinessBusiness

TechnologyTechnology

TodayToday

BusinessBusiness TechnologyTechnology

What are some of the changes you’ve seen?

What The Internet DoesWhat The Internet Does

Creates eComm-only businesses Dramatically improves service Attracts new customers Extends brand to new geographies Changes the supply chain paradigm Creates new channels Creates new ways to buy Creates new barriers to entry

It’s The Customer, STUPID!It’s The Customer, STUPID!

It’s The Customer, STUPID!It’s The Customer, STUPID!

1. Target the right customers2. Own the customer’s total experience3. Streamline processes that impact them4. Provide a 360-degree view of the customer

relationship5. Let customers help themselves6. Help customers do their jobs7. Deliver personalized service8. Foster community9. LISTEN! LISTEN! LISTEN! LISTEN!

Marketing Your BusinessMarketing Your Business

Who Is Your Target Customer?What Do They Need?

– What Are Their “Real Needs”?– What Are Their “Wants”?– What Can We “Make” Them Want?

How Can You Identify And Find Customers?

How Can We Reach Your Customer?

Doing Business OnlineDoing Business Online

Basics Of The InternetOnline Business ModelsWebsite Design Basics:

– What Makes A Site “Nice”?– How Can A Website Be Part Of An Overall

Marketing Effort?– What Are The “Tools Of The Trade” And

How Do I Use Them?

Web Site TechnologyWeb Site Technology

Hosting A Site Adding A Database Security

– Cookies– Blocking Directories– Secure Socket Layers

Email eCommerce

Basics Of eCommerceBasics Of eCommerce

Finding The Right Name Building A User-Friendly

Website Putting A Store Online Accepting Payments

– Merchant Accounts– Payment Processing

CRM

Getting People To Your SiteGetting People To Your Site

Search Engine Traffic

Linking Banner Advertising

– Paid– Exchange

Off-Line Marketing Partnering Online

ConsultingConsulting

Are You a Consultant?Are You a Consultant?

Do you have industry experience that you can share?

Are you able to communicate your knowledge?

What other skills do you bring to the table?

What is your competitive advantage?

Business Model ComponentsBusiness Model Components

Customer management Use of community “7-S” understanding Business “Diamond” Making money? Why or why

not? Comparison of “bricks and

mortar” and online parts of business

Competition (and their models) Business forces, daisy chains,

or whatever!

Transitions from earlier models

Current actions and plans for the future

Technology Mergers and acquisitions Strategic alliances and

partnerships Coping with

legal/government laws and regulations

Business Models - Simplified ListBusiness Models - Simplified List

Transplanted business models– Mail order retailer - amazon.com– Advertising model - yahoo.com– Subscriptions - wsj.com– Retail - netscape.com– Content distribution - MP3

Internet-native models– Portals and CSPs– Auctions (dynamic swaps, real time)– Infomediaries

““7-S” Model7-S” Model

StructureStructure

StrategyStrategy SystemsSystems

SkillsSkills StyleStyle

SharedValues

SharedValues

StaffStaff

SWOT Analysis FrameworkSWOT Analysis Framework

??Strengths Weaknesses

Opportunities Threats

Business Business DiamondDiamond

ManagementProcesses

ManagementProcesses

Culture,Beliefs

andNorms

Culture,Beliefs

andNorms

Informationand

InformationSystems

Informationand

InformationSystems

Organization,Skills and

Jobs

Organization,Skills and

JobsBusiness

Processes

BusinessProcesses

Porter’s Five Porter’s Five ForcesForces

PotentialEntrants

PotentialEntrants

SuppliersSuppliers BuyersBuyers

SubstitutesSubstitutes

Threat of new entrants

Bargainingpower ofsuppliers

Threat of substituteproducts or services

Bargaining power of buyers

Industry Competitors

Rivalry Among ExistingOrganizations

Step Four: Your BusinessStep Four: Your Business

Key QuestionsKey Questions

Why do you want to be in this business?Do you have clients? What did you do

to get them or how will you get them?Did you know why your customers

chose you?What is your primary mode of

marketing?

Making Money OnlineMaking Money Online

Think of revenues as pillars that support your business.

How many different pillars is your business built upon?– Web Site Design– Consulting– Hosting

What would happen to your revenues if you combined a wide array of pillars?

Principles For Super SuccessPrinciples For Super Success

Consistently demonstrate a deep sense of empathy.

Remember that your client is silently begging to be lead.

Your customer wants a trusted advisor, not a sales person.

Your #1 goal is to help your client focus.Give your customers a backstage pass to your

business.

Principles For Super Success (cont.)Principles For Super Success (cont.)

Articulate your customers’ needs better than they can.

Keep your customer at the center of attention.Meet and move your client on their pace.Have a powerful vision to share with your

customer.Help your customer uncover & solve

problems.

Principles For Super Success (cont.)Principles For Super Success (cont.)

Communicate with IMPACT or don’t communicate at all.

Help your customer feel good about their decisions and actions.

Your customer would rather lose money or not make a decision then look or feel foolish.

Your customer wants to be educated.

Principles For Super Success (cont.)Principles For Super Success (cont.)

Always be externally focused.The customer cares about WIIFMYour customers need strategy and

solutions.Show your customers the before and after.Show your customer, don’t tell your

customer.Your customers WANT TO STAND OUT!

QUESTIONS AND ANSWERSQUESTIONS AND ANSWERS