Top 5 Tips When Creating A Virtual Business

  • Posted on February 1, 2011
  • by Alan Blume

Here's to "Your Virtual Success"!

Perhaps you’re considering creating a business or expanding a current business. As with many businesses, investing in inventory, product development or warehouse space might seem requisite. And perhaps this appears to be a reasonable or even logical approach, borrowing the famous quote from Field of Dreams, “if you build it, they will come.” After all, your simple business plan projects profits after only a modest startup period. My advice is to think about this again. When creating a new business, it’s highly advantageous to operate in a way that is both conducive to a flexible lifestyle while mitigating downside risk, including ramp up time or significant upfront investment.

Then again, you might be thinking that you can alleviate the risk by securing a bank loan, tapping into your home equity or even attracting venture capital. My advice, once again, is to think about another path, preferably one revolving around the golden rules above. Yes, there are a select few who can beat the traditional small business odds which are often estimated at 5 to 1, where only 20% of new businesses succeeded in the first 3 years. Venture capital odds are surely the worst, where many experts maintain the odds that you will succeed (find VC funding, maintain control of your company and enjoy a positive liquidation event) are about 5,000 to 1. How difficult are these odds? At roughly 5,000 to 1, you would odds comparable to getting struck by lightning.

Bootstrapping your virtual business should be much easier than funding a traditional brick and mortar business. Before opening a traditional storefront, or investing in a physical office, ask yourself if you can work from a home office, or if you can adjust your operations to accommodate a virtual business model. Instead of getting on a plane or train, are you sure a “face to face” Skype conference call wouldn’t suffice? At a cost of about $5 per month, you can simultaneously video conference with multiple people, regardless of their location. Instead of investing up front in capital equipment, can your new business secure orders in advance, or even deposits in advance of delivery?

  1. A short path to the money (limited ramp-up or development time)
  2. No upfront capital
  3. Customer deposits in advance of delivery
  4. Contractor based assistance for delivery
  5. Niche marketing opportunity (it’s much easier to target a vertical than a horizontal)

When thinking about your next venture, think about the Top 5 virtual business startup tips and if possible, find a virtual business model that leverages these for your new or existing business. Try to follow some or all of these.

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Posted in: emerging business, Home Office Business, Venture Capital, Virtual Business
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How can an entrepreneur find competent, cheap and effective sales and marketing resources? This is a question that many startup companies and emerging companies must ask themselves every day. It is especially true for the bootstrapped, or simply cash strapped entrepreneur. In many cases the founders of these companies might have great development or operational skills, but lack the sales or closing genes necessary to bring in the business. Thus the dilemma, an entrepreneur has a great product, service or solution, but they don’t have the knowhow or sales and marketing team to build a pipeline and convert suspects to prospects, and then to new clients.

Of course, simply stated, the dilemma above actually represents two distinct issues, driving leads into the sales funnel (a marketing function) then qualifying and closing these leads (sales function). There does appear to be an answer to this question, with a new spin on an old methodology, the independent sales agent model. There are now opportunities for entrepreneurs to outsource the lead development and sales process using a virtual sales and marketing approach, thus conserving cash and mitigating startup risk. This model results in a true “reap what you sow” relationship, which emerging companies seem to like. In these cases, even a modest budget might be sufficient to pilot this model.

Why would this new virtual marketing and sales agent model work for a startup, entrepreneurship or cash strapped company? Hiring a great sales person, let’s say his name was Tom, even on a highly leveraged commission plan, with benefits, training and management time would cost at least $5,000 per month for most industries, and this is before any commissions or marketing costs are added. Because of our virtual approach, we were able to provide both the sales capacity AND the marketing for half the cost of a “Tom”. We think it is only possible to do this using a virtual, no overhead, internet based tools approach.

Virtual Sales & Marketing Solutions

Virtual Sales & Marketing Solutions

Though the sales agent is not typically full-time, the results are can be far superior because the management time, reporting, sales skills, marketing and lead generation are all incorporated into one streamlined, cost effective, outsourced solution. This concept may take a while to catch on with some emerging companies, but it is, in many ways, a better approach to the traditional path of securing large loans or a second mortgage, angel funding, or venture capital funding. And there is a hidden bonus, if the salesperson leaves, there is no need for a new hiring process, they are replaced under this model with another sales agent, trained and brought up to speed without cost to the entrepreneur.

This model eliminates the need to find the sales closer that can “do it all”, find and cultivate leads, follow-up on pipeline worthy accounts, provide marketing materials and presentation materials and finally close new business. It also reduces cash flow needs, venture capital or other funding requirements. All of these services can be provided together, at a lower cost than the traditional brick and mortar model. Perhaps it sounds too good to be true, but I think that is because this is a new approach to an old problem. This new approach, leveraging the virtual model, internet tools and an outsourced contractor methodology can deliver better results than the old-fashioned, hire a brand new internal sales and marketing team and hope it works, brick and mortar approach.

For more information, read Your Virtual Success (Career Press) or go to: http://www.startupselling.com. StartUpSelling provides outsourced marketing, sales and lead generation services focusing in the areas of eMarketing, telemarketing, SEO, insurance agency social media marketing and website development. StartUpSelling specializes in innovative entrepreneurial marketing and sales concepts.

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Posted in: business, emerging business, Entrepeneurship, Venture Capital, Virtual Business
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The Art of the Start, The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything, offers readers both good news and bad news on starting up a company. The good news offered by Guy Kawasaki rests upon his background as a venture capitalist. Kawasaki is the managing director of Garage Technology Ventures, an early stage venture capital firm. According to their web site, “Garage Technology Ventures is a seed-stage and early-stage venture capital fund. We’re looking to invest in extraordinary entrepreneurs who have the ability to build great teams and great companies.” Thus the good news revolves around strategies to pitch business ideas to venture capitalists, positioning your company, writing a business plan, “making mantra”, etc. These are all important activities and based on sound advice. Kawasaki offers exercises, tidbits and suggestions on redefining thinking in entrepreneurial terms, all helpful to early stage entrepreneurs.

The bad news revolved around bootstrapping and the fact that there was only one chapter on this truly important topic. The Art of the Start seemed slanted toward the “come up with an idea, write the business plan, pitch to venture capitalists, secure early stage venture, increase sales, find additional venture, liquidation event road”. I strongly favor bootstrapping, self funding and virtual business ideas over the borrow tons of venture capital funds to succeed path, and fully understand that reader bias could have crept into this perspective.

If your entrepreneurial idea absolutely requires the significant capitalization that venture capitalists offer, The Art of the Start should definitely be at the top of your list. There is an excellent section on pitching to venture capitalists complete with the questions which are likely to be asked and suggestions on the best answers to offer would be venture investors. I found the book to be well written and thought provoking, particularly enjoying the final chapter, The Art of Being a Mensch (and the three foundations of menschhood), which you may want to read first. So, the good news is, though there are more aspects to this book than venture funding, you should definitely read this book if you’re thinking of venture capital funding. The bad news is that statistically, entrepreneurs are better off finding alternatives to venture capital funding and might be better off reading books focused on alternatives to venture capital funding. Regardless, I enjoyed The Art of the Start and found it an interesting read.

For more information on start-ups, read Your Virtual Success (Career Press) or visit: http://www.yourvirtualsuccess.net.

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Posted in: business, Business Book Review, emerging business, Entrepeneurship, Home Office Business, Venture Capital
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The Golden Rules of Virtual Business

  • Posted on April 5, 2010
  • by Alan Blume

There are four Golden Rules to follow when creating a virtual business:

1. A short path to the money (limited ramp-up or development time)
2. No upfront capital
3. Customer deposits in advance of delivery
4. Contractor based assistance for delivery

Of course, you might be thinking of an investment intensive business that does not adhere to these rules. My advice, think again. The rules above allow you to create your own plan, to operate in a way that is conducive to your lifestyle, or at a minimum, provide you with excellent upside while mitigating downside risk.

Then again, you might be thinking that you can alleviate the risk by attracting venture capital, thereby investing a lot of your time as opposed to a lot of your money. My advice, once again, is to think about another path, preferably one revolving around the golden rules above. Yes, there are a select few who can beat the VC odds, maintain control over their startup, go IPO and make millions. In other words, they beat the 5,000 to 1 odds of having this happen. How extreme are these cases? You have the same likelihood of getting struck by lightning. Though 5,000 to 1 odds are good if you’re worried about getting electrocuted, they stink if you want to go IPO with your VC of choice.

Bootstrapping your virtual business should be much easier than funding a traditional brick and mortar business. For example, let’s say you have a great recipe for clam chowder (that’s chowdah if you come from my neighborhood) and you’re thinking of opening a restaurant, thereby breaking all of the golden rules. Hold on – let’s come up with some alternatives. Have you considered taking your recipe and partnering with an existing company or restaurant? How about partnering with a catering company? What about offering it over the internet? Can you offer it via takeout or delivered to your door? Sell it to restaurants? Sell it through a food distributor? Are there any alternatives to investing a million dollars and waiting a year to see if your business will be viable? Perhaps none of these ideas will work for your business idea. Regardless, when thinking about your next venture, think about the Golden Rules and if possible, find a virtual business that will follow some or all of them!
For more information read Your Virtual Success, Finding Profitability in an Online World: http://www.yourvirtualsuccess.net/

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The Venture Capital Trap

  • Posted on March 23, 2010
  • by Alan Blume

Which is more likely to happen? You come up with a great business concept, secure Venture Capital funding and your startup goes IPO, making you millions – or you get struck by lightning? Unfortunately the answer is that you’re more likely to get struck by lightning which, according to the National Weather Service has odds of 5,000 to 1. Should you ever consider venture capital? Companies requiring a significant infusion of cash to get started may require this type of funding, and could thus consider it as long as the founders are aware of the long shot odds. If you’re starting up a truly capital intensive company, perhaps a biotech, medical device, or energy related company, you might be forced to consider Venture Capital. But if you plan on creating a small startup service company, a new accounting firm, consulting practice, training firm, video production company, cleaning services firm, boutique software company, or any of the thousands of opportunities that aren’t truly capital intensive, I’d suggest you stay as far away from the vulture capitalists as possible. There are far better financing alternatives which offer greater control over your destiny.

Are you thinking of creating a software company which expects to hit $10 Million in sales in three years – don’t bother. Either you’ll miss your targets and get booted and diluted or the resulting flip will yield you a fraction of what you would receive on your own. That’s why Venture Capital is a ludicrous bet for most entrepreneurs. But worse than that, it’s also a pressure cooker and you’re almost guaranteed that you will lose control. Not only will you have the dubious honor of giving away a huge portion of your company, you’ll also have a VC backed board breathing down your neck. They will be watching where and how you spend your money while they fly first class and wine and dine in four star establishments at your expense. When they visit you, chances are they will be flying first class and staying at a top notch hotel. Don’t be surprised if your VC backers drop $10,000 or $15,000 of your money to attend one of your board meetings. Then again, is it your money or their money? And pragmatically which scenario would be better for the VC’s – exceeding the proposed massive sales targets or having you miss your early targets and then taking control of your company – dirt cheap – then exceeding the sales targets?

Here is some great advice from Peter Ireland from his Smart Startup Guide (www.antiventurecapital.com):

• First, chasing outside capital is by far the most unpleasant and drawn-out ordeal experienced by entrepreneurs. It always seems to take “forever”. (For this reason, veteran entrepreneurs try to avoid raising outside capital at all costs.)
• Second, based on the fact that your typical early stage Venture Capital firm invests in only one company out of every 500 business plans it reviews, your odds of succeeding are only 1:500.
• Third, in about 50% of instances where an early stage company actually succeeds in raising Venture Capital, the founder is fired within the first year and kisses his or her stock good-bye.

Perhaps this is merely a buyer beware blog entry. I can’t say that every VC has an agenda, other than massive financial returns, just that their money is extremely expensive and comes with great risk. Bootstrapping is a far better alternative for most startup companies, and perhaps, if you’re thinking of a startup that requires a large capital infusion and must then consider venture capital, you should think of a different business venture or a better funding alternative. Are there any circumstances when venture capital is clearly a better alternative? Certainly – they are clearly better than a loan shark and possibly better than a pawn shop which might charge 10% interest per month!

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