This blog includes posts on lead generation, eMarketing, Web Marketing, SEO and other leading edge marketing techniques.
-Alan Blume
All posts with the tag 'Startups'
The Venture Capital Trap
Posted on March 23rd, 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!
BIG BUSINESS BOOKS vs. small business books
Posted on November 12th, 2009 by Alan Blume
Having recently completed The Knack as noted in my prior post, I pondered why I enjoyed the book so much. I’ve read many books recently including: The World is Flat by Thomas Friedman, Tipping Point by Gladwell, The Business of America by John Steele Gordon, Freakonomics by Levitt and Dubnar, The Art of the Start by Guy Kawasaki, Small Giants by Bo Burlingham, The 4-Hour Work Week by Tim Ferriss, Blue Ocean Strategy by Kim and Mauborgne and From Good to Great by Jim Collins. I also read The Lost Symbol by Dan Brown (OK but not great) and City of Thieves by Benioff (Excellent!), but this post pertains to business books. I tend to place books I select to read into four categories: Small Business Books, Big Business Books, General Thought Provoking Books, and Fun Reads. Thus this list would look like this:
* General Business/Thought Provoking: Tipping Point, The World is Flat, The Business of America, Freakonomics
* Big Business: From Good to Great, Blue Ocean Strategy
* Small Business: The Knack, Small Giants, The Art of the Start, The 4-Hour Work Week
* Just for fun: City of Thieves, The Lost Symbol, Mayflower
Although I enjoy all of these categories, I derive the greatest business benefit from books like The Knack, Small Giants and The Art of the Start. These books apply directly to small businesses like mine. The Big Business books like those mentioned above seem geared toward large corporations and teams which are buried in the muck and mire of bureaucracy, far removed from my daily routine. So if you’re a small or emerging business, a would be entrepreneur or a home office based operation, read the The Knack or Small Giants, and you’ll gain some valuable small business insights – hold off on Blue Ocean Strategy or From Good to Great. And just for fun, pick up (or download) a copy of City of Thieves it’s a great read, particularly when contrasted with The 900 Days. www.alanblume.com for more on virtual business…
If a Tree Falls in Cyberspace and Everyone is there to hear it – does it make a sound?
Posted on October 26th, 2009 by Alan Blume
Just because you build a web site, send out an emailing, or create a blog doesn’t mean anyone will pay attention. It reminds me of the old saying, “If a tree falls in the forest and no one is around to hear it does it make a sound?” On the internet, everyone is there to hear your message, but it may not make a sound they can or will hear. Thus it’s all about targeted marketing and messaging, bringing a message that rings true to your specific target market, so it will make a clear and compelling sound when it arrives. This is easy to say but harder to do. What we’ve seen at StartUpSelling, at least in the B2B space, is a combination of targeted outbound calling combined with eMarketing, web seminars and a current web site seems to do the trick nicely for essentially any industry. We call this multidimensional marketing and find there is an order of magnitude difference in using a blended approach to a singular approach.
How to get Published – a Virtual Sales & Marketing Case Study
Posted on May 13th, 2009 by Alan Blume
It’s difficult to get published – conventional wisdom states that less than 1% of would be authors receive an offer from a reputable publisher. A few weeks ago I signed my first book deal. This posting reviews the virtual sales and marketing efforts which were leveraged to accomplish this. I worked on a book about virtual businesses for about a year and upon the completion of a basic draft, decided to contact some literary agents (it’s easier to find a publisher if you have an agent representing you). I found several free internet sites listing agents including: www.1000literaryagents.com, www.writers.net and www.writersdigest.com. Some sources estimate that top literary agents receive about 400-1,000 unsolicited book queries every month, in other words, it’s very competitive. I started this sales and marketing campaign as I would at www.StartUpSelling.com for any business. I selected 1,200 agents from the free online lists above. In most cases they had an email listed for the book query submission (that’s agent speak for a formal proposal a writer must create to whet the interest of a prospective agent). As with any sales and marketing campaign, it usually begins by building a prospect list. But hold on a minute, this isn’t a smart, targeted, virtual sales and marketing approach. You are much better off targeting a niche or specific profile than you would be sending out emails to 1,200 general literary agents. I refined the list and culled through the agents to identify 100 who were interested in business books, non-fiction and prescriptive books (how to books). I focused first on agents listing business books as a specific area of interest. This information was available for free on the sites mentioned above and the respective agency websites in the instances that the agency actually had one (there are some agencies that have very limited websites or don’t have them at all).
The list building, culling and niche targeting were done in just a few days. I decided to do a test run of 30 agents, and would then do another wave of 70 agents if necessary. I had read that it was extremely difficult to sign with an agent, and that you might not even get a response to a manuscript inquiry (query letter). As fall approached in 2008 I sent out my first wave of emails. Here are the results for both waves:
Wave 1 Statistics
- 30 Sent
- 4 Interested
- 12 Not interested
- 14 No response
Wave 2 Statistics
- 70 Sent
- 5 Interested
- 20 Not Interested
- 45 No response
Overall, 9% of the agents expressed interest, 32% were not interested and I received no response from 59% of the agents. Normally you would follow up a campaign with a personal telephone call/voice mails. In this particular industry, however, the rules of engagement state that agents prefer no calls. After all, in a system that rejects 98% of all would be authors, the number of follow up calls would overwhelm the agents. As a side note, there were some highly personalized responses and suggestions from agents who did not have interest at the moment and some standard form rejection letters too. I sent out wave two a week after I sent the first wave of emails. I did not market to any agent requiring a query on paper.
Most of the results came in within the first two weeks of the respective waves. Of the 9% expressing interest, their approach varied dramatically. Four agents asked me to email my full proposal; another four asked me to print out a full proposal and snail mail it (or FedEx) it to them and one asked me via email if I would like him to immediately contact publishers on my behalf to see if they had interest. I immediately sent my proposal to the four agents who requested it via email attachment. About a week later I sent out one paper copy to one of the four agents who expressed a particularly high level of interest in my query. In retrospect, I don’t know why I bothered – this is a really stupid approach I liken to the current issues with traditional print Newspapers – the distribution system makes no sense (though it was just fine in 1949). Of the four agents who received my full email proposal, two asked for an exclusive (a period of time whereby they could solely determine if they wished to represent me) and two asked if I would speak with them right away. One of the agents who wanted to have an immediate discussion was Wendy Keller from Keller Media. Wendy asked if we could set up a conference call to discuss my query. I sent her a GoToMeeting invitation, and within 24 hours, we were meeting virtually in cyberspace. Later that day, the agency representation agreement was sent and signed digitally, there was no paper that ever exchanged hands. It took me less than four weeks from the time I decided to approach the literary agency market to sign with a well known agent. About 6 months later, my agent secured an offer from a well known business book publisher, Career Press. My book which is to be called Your Virtual Success, Finding Profitability in an Online World is due out at the beginning of 2010. Leveraging virtual sales and marketing tools is effective, inexpensive and reusable. My virtual business model expands and contracts easily and is far more profitable. I look forward to exploring the nuances of this in my upcoming book from Career Press, Your Virtual Success, Finding Profitability in an Online World. www.startupselling.com www.alanblume.com www.kellermedia.com www.careerpress.com
Leveraging Brick & Mortar Unemployable
Posted on April 9th, 2009 by Alan Blume
We were looking for someone with the following qualifications and attributes:
Seasoned sales professional, articulate and intelligent, strong sales track record, enjoys prospecting and working remotely with prospects, good written communication skills, superior verbal communication skills, strong closing skills, Bachelors degree, Microsoft Office literate, work from home venue, self motivated, independent – AND – and that they would be willing to work with no initial compensation on a commission only basis (or nominal draw against commission).
Impossible to fill this position you might say. But in the virtual world, this position is not difficult to fill. We can tap into stay at home moms, stay at home dads, retired or semi-retired professionals, and those who just cannot leave their homes for a myriad of reasons. So we posted a free ad on Craigslist, received a couple of dozen responses, closely reviewed four and have now hired a superbly experienced individual to work with us. This individual sought a stay at home professional position, extreme flexibility, and compelling income opportunity through a commission only program. We offer – flexibility, opportunity and income potential. They can meet their children when they get off the school bus without concern about punching the clock or reporting there whereabouts. We have used this model successfully for five years. We enjoy a competitive advantage by working with superior, highly qualified people that traditional brick and mortar businesses cannot employ.
This makes us flexible, profitable, and able to easily expand or contract when necessary. We don’t invest in offices, furniture, heat or lights – just people and technology. And nobody gets paid until they produce something – if someone is earning – they are producing. It’s a better model and a better lifestyle for everyone we work with. www.alanblume.com
Virtual means competitive advantage – hiring the best & brightest
Posted on March 17th, 2009 by Alan Blume
Our virtual business is expanding while other, more traditional businesses are in the midst of a major contraction. This spells o-p-p-o-r-t-u-n-i-t-y for those companies which can take advantage of the talented labor pool that is now available. It’s always challenging to hire the best and brightest. But in a virtual model, we can deliver greater value because all of our investments are in people and technology. Thus our prices are often 30% or 40% less for comparable services than our “traditional” competitors. We can deliver better results because we are investing in better talent and current SaaS (Software as a Solution) web based technologies like GoToMeeting, GoToWebinar and SalesForce.com. For our lead generation telesales operation, we are finding amazingly talented people across the country who have been laid off after years of efforts for competing firms. The same holds true for our marketing contractors, web designers, graphics team, writers and editors, all of whom work virtually. And of course, we can target recession resistant industries because our model is highly elastic. Thus, we are enjoying what we hope will be a continued expansion. But if we do ever experience a softening, the virtual model makes it much easier to contract quickly, gracefully and without the typical adverse impact to the bottom line. And everyone who works with us – understands this model. That’s one of the reasons our teams are motivated without the usual “motivation and team building techniques” required in a tradition brick and mortar environment. www.alanblume.com
It’s more than the cost of gas – virtual vs. on site appointments
Posted on March 6th, 2009 by Alan Blume
GoToMeeting (or comparable web meeting products) is the backbone of any Virtual Business (and most certainly mine). When comparing the cost and efficacy of an on-site meeting located 60 miles away versus a virtual meeting there are many factors to take into consideration:
1. Lost time to be in appearance ready condition
2. Lost travel time going
3. Lost waiting time
4. Automobile costs (not just gas – add wear and tear)
5. Parking and Tolls when applicable
6. Lost travel time returning
7. Lost time to transition back to productivity after return
So let’s calculate this example in a more precise (and compelling way):
1. One HR: Lose an hour to shower, dress for success, get directions to your appointment, pack your laptop, park and walk to lobby (as opposed to a virtual t-shirt and slippers wardrobe)
2. One HR: Lost travel time to drive to appointment
3. 15 minutes: Lost waiting time ensuring you are early and ready for your appointment
4. Auto Costs $66: It’s not just the gas, cars are expensive to operate (120 miles @ .55 mile)
5. Parking: $20 for parking and tolls on average (free in the suburbs and more expensive in the city)
6. One HR: Lost travel time returning
7. 15 minutes: Unpack laptop, reconnect to network, change (who wants to work virtually in a suit), move back into production mode
8. Bonus Loss: Appointments that cancel on-site, doesn’t happen often, but when it does, it’s a productivity killer
In the example above, an on-site meeting costs $66 (assuming no tolls or parking) plus 3.5 hours of lost productivity. Assuming you earn $100,000 per year ($50 per hour), the lost productivity costs $175. Total loss for the meeting is $241 compared to almost $0 for a GoToMeeting virtual meeting. The most insidious of these losses is moving in and out of production mode. When I’m waiting for my clients or prospects virtually, GoToMeeting is ready, up and running and I’m working in the background. My clients and prospects prefer on-line meetings because they are faster, more efficient and more flexible. If they have to cancel (or I do) production is not impacted. So when calculating “The Cost of Driving to a Business Meeting”, make sure you use the 55 cents per mile metric, not just gas. And build in the lost transition time on top of the lost driving time. You’ll be surprised at the difference in efficiency. At StartUpSelling, 99% of our meetings are done via GoToMeeting (or GoToWebinar) for clients, prospects and our virtual contractor work force. It makes us much more efficient and responsive. After all, when an email or call comes in – we’re at our virtual office and ready to respond.
Go Virtual – Never Get Fired Again
Posted on March 5th, 2009 by Alan Blume
The more virtual your business, the more flexible the hours, the lower the overhead, the greater the profit potential, and the easier it is for the entrepreneur or independent sales professional to use their strengths doing what they do best instead of expending energy and money trying to shore up their weaknesses.Whether you are an aspiring entrepreneur starting with just a few hundred dollars, a small business scrambling for venture or expansion capital, or a sales professional in insurance, stocks, real estate or any other services business, you need to leverage the virtual model.
It’s easier to succeed in a virtual model and the virtual model can be applied to almost any business. Unlike Ben Franklin’s famous quotation, “A penny saved is a penny earned”, in many virtual business, “A penny earned is a penny saved”! With low or no overhead, revenues produce far more profits. Working for yourself, working from home, working without the encumbrances of traditional brick and mortar, free from rent, overhead, receptionists and commutes, you can be more productive, will achieve greater independence and be rewarded with more flexibility.
For over 5 years I’ve enjoyed this lifestyle and my company, StartUpSelling, Inc. has been successful, profitable and flexible. I love it and the people I work with, all contractors based from their home offices, love it too. Do you have a virtual business? Are you looking to start a new business? Are you ready to leave the rat race? Are you tired of a control freak boss? Have you been laid off, downsized or just plain fired? Let me know your thoughts and experiences about the new trend toward virtual. It’s a better path for many of us!