Tag: business advice

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The Importance of Aligning Business and Personal Goals as an Entrepreneur

by Cate February 11, 2014 2 Comments

Part of what I do as a startup consultant is to help make sure that entrepreneurs have aligned their business goals with their personal goals before they jump into launching and running their businesses. Everyone has goals they’d like to achieve in both their personal and professional lives. Unfortunately, many times, entrepreneurs get easily sucked into chasing a billion dollar success metric when, in reality, that type of business won’t allow them to meet the personal goals they embarked on the road of entrepreneurship to achieve to begin with.


Constantly barraged with information about how to continually grow their businesses and told that they need to be the next Bill Gates to be successful, entrepreneurs end up feeling constantly stressed and over-worked and not able to take advantage of many of the benefits they thought they’d gain from starting their own business to begin with.

Now, wanting to be the next Bill Gates is a perfectly acceptable goal. However, if your personal goal is to work fewer hours so you can spend quality time with your family, the two probably don’t mesh.

There is an old story about a man in a Mexican fishing village who would sleep in every day, take his small boat out and fish for a few hours, come back to shore in the early afternoon and sell his small take, and enjoy the rest of the day spending quality time with his wife, relaxing on the beach, or gathering for conversations with his friends.

One day, a businessman from the U.S. showed up in the village on a doctor-ordered vacation and noticed the fisherman’s routine. He couldn’t help but want to share some business advice with the fisherman and so he introduced himself and began trying to persuade the fisherman that he should get up early and fish longer hours so that he could catch more fish.

“Why would I want to do that?” the fisherman asked. The businessman was somewhat baffled by the question but responded that a larger daily catch would mean more money for the fisherman. He could then buy a larger boat and catch even more fish. Soon he’d have many boats and many times more fish to sell and could expand his operation internationally.

Again, the fisherman asked, “but why would I want to do that?” The businessman, more exasperated now, explained that with such a larger operation the fisherman would be making many times more money and after about 30 years he could retire with a lot of money in the bank.

“And what would I do then?” asked the fisherman? Well, you could sleep in every day, fish only a few hours, come back to shore early and spend quality time with your wife and friends while relaxing on the beach said the businessman.

Now, of course this fable, as all fables, is a very simplified version of reality, but its lesson is important. As an entrepreneur, you need to decide what your goals are both personally and professionally and make sure they align. Then you can build your company strategy from there to achieve whatever happiness or success it is that you seek. If you don’t align the two goal sets, you’re guaranteed to feel like a failure on one front or the other.

 

Now I want to hear from you. What do you think about the old fisherman fable? Do you feel like entrepreneurs need to be obsessed with business to succeed? Have you taken a look at your personal goals and professional goals to see if they align recently? Let me know in the comments below what your personal and professional goals are and if they match up.

Did you find this video helpful or interesting? If you liked what you heard or you think someone you know could benefit from this discussion, please like and share.

 

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Common Misconceptions About Venture Capital

by Cate January 28, 2014 No Comments

In the world of entrepreneurship, raising venture capital money is often looked at as a success in and of itself. It’s the glitziest form of investment that gets the most attention and most play in the press because many VCs have become mini celebrities and the dollar amounts invested can be quite large.

However, venture investment isn’t right for the vast majority of companies and many brand new entrepreneurs have a lot of misconceptions that will hold them back as they attempt to build their new businesses.

The first misconception is that an unknown entrepreneur with no track-record of building successful businesses, no traction – or sometimes not even a product yet, and no VC connections is going to be able to easily get funding if their idea is good enough. Has this ever happened? Of course. Is it likely to happen? Definitely not.  Venture capitalists don’t hand out cash – or often even take a meeting with you – if there is no reason to believe you’ll succeed because they don’t know you, you don’t have a track record, and you can’t prove demand for your product because most new businesses fail.

Another common misconception is that you will still be in control of your business after taking on a VC investment. When you take an equity investment from a VC you’ve given up ownership and you’ve usually also given up board seats. This means you’re no longer in complete control. Additionally, you’ve committed to striving for a quick exit, whether or not that would have been your management strategy if you didn’t take on the money. You’re now beholden to your investors instead of a freedom-filled entrepreneur.

The third misconception is that VCs will be interested in anything less than exponential growth. You may have a great idea for a business that will experience modest growth and make great money for you, but that’s not a business a VC will be interested. VCs invest in bunches of companies and most of them fail, so they need their winners to carry the returns for their whole fund. That means that if your business doesn’t present the possibility for insanely rapid growth and 100x returns, you’re not looking in the right place if you’re looking for VC money.

Finally, the misconception I find most frustrating, is the idea that you can start looking for investment today and have a check by the end of the month. Raising venture capital is a long process that takes a lot of time and a lot of effort. You’re typically looking at an absolute minimum of 4 to 6 months to get an investment, usually longer. If you’re going to seek out venture capital you need to do so far in advance of when you need the cash. You can’t wait until the last minute and expect a VC to swoop in and save you without any time for evaluation and due diligence on his end.

Don’t be discouraged though. Just because VC might not be the right source of capital for your startup does not mean your business dreams are dead in the water. There are a number of other sources of capital that can get you going. Take a look back at my old funding sources video to get an idea of what might be a better fit for you and your business.

Now I want to hear from you. What other common misconceptions about raising venture capital have you heard? How did you fund your business? What was the toughest part of raising capital for you and how did you overcome it? Share your stories with us in the comments section below.

Also, if you liked what you heard or you think someone you know could benefit from this discussion, please like and share! 

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Are You Financially Ready for Entrepreneurship?

by Cate January 21, 2014 No Comments

One of the first things you need to examine before deciding if entrepreneurship is right for you right now is your finances. When starting a new business, you’re more than likely going to spend at least a few months in the hole and, despite the fact that your business will be losing money, there will be startup costs and your living expenses that will need to be paid anyway.

When you’re deciding if you’re financially ready to start a company, begin by looking at your savings. Until you start generating a profit, you’ll be living off those savings. How much do you already have saved up that’s available for your living and startup expenses? Are you comfortable spending it and depleting your nest egg to get your business off the ground?

Also take a look at your monthly living expenses. All of your regular expenses: rent, utilities, cell phone, tv and internet, health insurance, food, gas, and everything else will still need to be paid. The bills don’t disappear just because you quit your job and launch your own business. You need to figure out, in advance, how much you need to survive each month so you can compare that to what you have saved up and see if leaving your day job is doable right now.

While you’re thinking about living expenses, also think about an emergency fund. Your monthly budget is what you’ll spend if all goes well. What if your car breaks down or your roof starts to leak? Will you be able to handle these little emergencies if you don’t have your regular paycheck coming in?

Finally, you need to factor in the costs of actually starting up the business. You need to estimate how much you’ll need to get started and combine that with your living expenses, emergency fund, and savings to decide if you can walk away from the day job yet or not.

Now, if this money talk has crushed your dream a bit already, shake it off. It’s important to be realistic about your finances, but, as I mentioned, realizing you’re not ready to turn in your resignation letter tomorrow doesn’t mean your entrepreneurship dreams are dead just yet. It just means your path to fulfilling them will be a little longer or more circuitous. If you want this, you should keep moving forward. You’ll just have to also maintain your current job until you’ve saved a bit more.

After thinking about your financial situation, are you ready to take the plunge into entrepreneurship or not? Leave me a comment and let me know if you think you’re prepared to jump in. If not, tell me why and what you plan to do to make it happen in the future.

If you found this video helpful, please remember to like it and share it with any of your friends or colleagues who would also get something out of it. 

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The Basics of Cash Flow Analysis for Startups and Small Businesses

by Cate January 7, 2014 No Comments

Everyone’s heard the refrain “cash is king” when it comes to running a small business and it certainly can be true. There are many new or small companies that are profitable but are still forced to close their doors because they didn’t manage their cash flow appropriately. That’s why careful cashflow analysis is incredibly important when you’re running a business.

Cash flow analysis is basically keeping track of when and how cash flows into or out of your business. This is different than just tracking your revenues and expenses because revenues and expenses should be tracked based on when money is earned or spent, not when it’s actually received or paid out. Depending on your business, your clients may not pay you for up to a couple of months after you’ve already delivered a service or product, so you have technically earned the revenue, but you don’t have that cash in the bank to pay your bills.

 There are 3 types of cash flow in any business: cash flow from operating activities, cash flow from financing activities, and cash flow from investing activities.

Cash flow from operating activities is that related to the core business and you’ll be able to use the income statement to figure out the cashflow from operating activities by taking the net income and adding back in expenses like depreciation that are not actual cash outflows and adjusting for accounts receivable and payable – cash that has been earned or spent but hasn’t actually been received or paid.

Cash flow from financing activities is that which is related to – surprise – financing activities – things like loan payments you make or payments you receive from loans made to others.

Cash flow from investing activities is that associated with any investments the company has made like the purchase or sale of land or equipment.

A statement of cash flows is one of the three basic financial statements but somehow still gets overlooked by many entrepreneurs. If you’re not familiar with it, you should speak with your financial officer or accountant to get an understanding of what your business’ cash flow looks like. You can also buy my business planning book and review the section on creating financial projections to develop your understanding of the importance of cash flow and how to determine and analyze it. You can get the Kindle version here and other ebook formats here.

Basically, cash flow will give you an idea of the financial health and liquidity of your business by showing you what you actually have available to use to meet the company’s obligations. $1 million dollars in profits isn’t as awesome as it sounds if your cash flow is such that you can’t pay your rent and will be evicted before you can ever collect that $1 million. You need to make a point of regularly reviewing your cash flow and making any adjustments where necessary to improve the health of your business. If you spot some problems, try taking a look at my old video for some tips on how to improve small business cash flow.

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How to Choose a Domain Name for Your Business Website

by Cate December 10, 2013 5 Comments

In today’s digital world your website is like a second storefront – or your only storefront if you don’t also have a bricks and mortar location – so designing your website and claiming your spot on the web is as important as creating a store or an office that is appealing to potential customers. Your domain name is an important piece of that puzzle, so here are some tips for choosing the right one.

Except in rare cases, your domain name should be your company name or some variation of it, so when you start brainstorming potential business names make sure you check to see if the associated domain name is available. If you can’t get a domain name that is the same or very close to your business name, you may want to consider choosing a different business name. While you’re at it, you should also check usernames on major social media properties like Facebook and Twitter. You don’t want to pick a company name and domain name just to find out that that identity is already taken on social media because this will complicate your branding greatly.

An exception to this rule is if you can buy a more generic but highly relevant domain name, like a dog breeder and trainer which may have any name – maybe John Smith’s specialty breeders and trainers who buys dogs.com. The domain doesn’t match the company name, but it makes a lot of sense with the business and will help generate traffic in its simplicity and relevance.

Along those same lines, you want your domain name to be simple, easy to understand and remember, and easy to spell. You need someone who hears about you to be able to remember the url and know how to spell it so that they are able to go visit your site later. If you choose a domain name that is too long, strange, has hyphens or other variants, or is difficult to spell you will forfeit traffic from people who simply can’t remember the domain when they go to try to find you online.

You also want to consider the extension or extensions you choose for your website. The extension is the piece of the url that comes after the period…i.e. .com, .net, .co, etc. Most people still automatically assume a .com extension so if they don’t have your url written down when they go back to their computers to search for you they’ll type your domain.com. Because of this, even if .com is a bit more expensive, it may be worth it to choose that extension. It can also be a good idea to buy up all of the extensions and simply redirect traffic from yourdomain.net or yourdomain.co back to yourdomain.com. That way you will avoid any confusion and make sure you catch all of the traffic that is looking for you.

If your business is built around you, it’s also a good idea to purchase the domain name for your name. In my case, that’s www.catecosta.com and that is my primary website.

Finally, make sure you don’t let your domain name expire! While most domain registry sites will alert you when your domain registration is about to expire, you should make sure you’re on top of it as well. If your registry service will let you use auto-renewal, that’s probably a good bet. You don’t want to choose the perfect domain name and build a successful site and following just to accidentally let that domain expire and be purchased by someone else.

Following these tips for choosing a domain name will help position you for success as you integrate your web presence into your overall branding and marketing strategy.

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Distinguishing Between Employees and Independent Contractors

by Cate December 3, 2013 4 Comments

You all know I’m a big fan of bootstrapping and utilizing independent contractors is one technique to help entrepreneurs accomplish that. However, it’s important to remember that, while the use of independent contractors can be of great benefit to businesses in certain situations, you need to make sure that these independent contractors are actually independent contractors and not employees whom you’re just avoiding classifying as such. This week’s video shares some basic rules that you can use to help you decide if a particular role should be classified as an employee or as an independent contractor so that you don’t get in trouble with the IRS.

The first criterion that the IRS uses to decide if someone is an employee or an independent contractor is behavior control: do you control how the person does the job they’re assigned to do or do you just care about the output? If you tell someone when, where, and how to work or provide detailed training, s/he is probably an employee.

The second criterion is financial control: if the person working for you is in control of his or her own business expenses, sends you an invoice for work, and can decide how much to charge and whether that rate means he or she makes or loses money, the person is probably an independent contractor. If, however, you provide all of the equipment and materials, set the rates, and pay without being invoiced, the person is probably an employee.

Finally, the way you structure the relationship is key to whether the person is considered an employee or an independent contractor. Does s/he work for you indefinitely at a set rate or are is s/he contracted on a per project basis? If someone is hired to do a specific project in a specific timeframe for a specific price, s/he is probably a contractor. If, however, you hire him or her for an indefinite number of projects lasting an undetermined amount of time and pay what amounts to a salary, you probably have an employee.

It’s important to make sure that you don’t mis-classify employees as independent contractors because the IRS is cracking down and you can wind up in a lot of trouble and facing stiff penalties if the IRS decides that you should have classified some or all of your independent contractors as employees and followed the relevant tax and employment laws.

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The 5 Cs of Business Credit

by Cate November 18, 2013 No Comments

It’s very likely that at some point along any entrepreneur’s business building journey they’ll be interested in getting a loan or line of credit from the bank to help them manage and/or grow their business. It’s important for entrepreneurs to understand what bankers will look at and evaluate before the time comes when they actually need the money. This week’s video explains the 5 Cs of business credit so that you can get your financial ducks in a row now and have a much better chance of getting approved for a loan in the future.

 

If you found this post helpful, please remember to share it with others who could benefit from the information as well. Use the icons to your left to like and share!

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How to Choose a Small Business Tax Professional

by Cate November 12, 2013 No Comments

As your startup or small business grows, its taxes will become more and more complicated. Most of us simply do not have the training or experience to make doing our own taxes worthwhile and would be better served to hire a professional to help us out.

Here are few things to consider when searching for the proper tax professional for you and your business:

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How to Create an Inexpensive but Effective Employee Training Program

by Cate November 5, 2013 1 Comment

In an earlier video I talked about how small companies can attract and retain top employees  even when they don’t have the cash to offer the compensation packages that big companies do. One of the things I mentioned is that top employees want to feel like they’re continually learning and growing, so it’s important for small companies to offer training and development to their employees. The logical next question then is: how do companies implement a successful employee training and development program when they don’t have much spare cash to spend on it? Check out this week’s video to find out:


 

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How to Conduct Market Research for Free

by Cate October 28, 2013 2 Comments

Last week I walked you through the basics of creating a solid marketing plan that you can use to promote your startup or small business. Much of what that marketing plan is built around is comprehensive market research, so I thought I should give you a little more detail about where to get some of the information you’ll be attempting to dig up about your ideal customer as you begin to work on your marketing plan.

Many entrepreneurs are afraid to dig into doing market research because they don’t know where to begin and fear that the only way to get good data is to pay a market research company a ton of money. When you’re just starting out with planning your business, however, you can do a ton of very effective market research yourself, for free. Check out this week’s video to learn about some of the best tools out there for getting market research without spending more than you already do for your internet connection.