Finance

I have come to understand that the various social media tools can be used in both social and business cases. But I can’t help but wonder when some of the social tools will generate money?

If you are not very familiar with social media, I recommend that you stop right now, and have a look at Common Craft’s instructional videos which deal with social media and social networks.

It seems as if businesses are finding ways to use social media (usually without paying anything). One high-profile example of a business which has taken up social media is Zappos. This is an extract from Sarah Milstein’s article in the New York Times, How Twitter can help at Work, where she points to one way to use Twitter: read more

Not only are small businesses struggling to find and keep good customers, they’re also having a hard time predicting when an opportunity they’re working on will become cash. And having a good handle on when to expect the cash to come can be just as important as how much to expect. Why do you think Popeye would always lend Wimpy money to get a burger? Because he knew he’d get his money the next Tuesday.

If you can gauge about when it’s coming that can help you plan a more effective money management strategy. And a good way to start improving your ability to predict when deals your working on will become $$$ is to define a few things. Take a look at the image below:

Milestones and Stages

If there is more than one person responsible for selling and/or interested in knowing what’s in the pipeline you’ll definitely benefit from identifying a few basic milestones you may go through when trying to close a deal. The above diagram lists a few as an example. Don’t get scared thinking you need some long drawn-out sales process to follow, but think about maybe 4 or 5 stages you go through on a regular basis when selling. Once you identify these come up with a short description of what it means when the deal is in this stage of the game. read more

Jeremy Hanks (@jeremyhanks on Twitter) analyzed Santa as an entrepreneur in his post called “Santa Claus: World’s Greatest Entrepreneur.”. I loved what he did so I crafted a venture-capital pitch for Santa to illustrate the kind of deal that venture capitalists would fund in today’s economic conditions.

1. Problem. Parents need a method to influence their non-compliant kids throughout the year. This is a universal problem beginning at approximately age three and continuing up to the teenage years.

2. Solution. Outsourced bribery via jolly old man who gives candy and toys to nice kids and lumps of coal to naughty ones.

3. Business Model. Revenue sharing with toy companies and candy companies, licensing image to retailers, and royalties from multiple movies, songs, and publications.

4. Underlying Magic. Ability to deliver toys to all the kids around the world in one night, make reindeer fly with near zero-carbon footprint, enter homes through chimneys, know what every kid wants, and know whether every kid has been naughty or nice. Zero support issues due to omniscience. Completely lead-free materials. Over fifty patents filed.

5. Marketing and Sales. Current SEO methods yield 15,700,000 hits in Google. Partnerships with toy manufacturers, candy companies, and retailers to increase Santa’s brand awareness for mutual benefits. Deep inroads into western literature. Creation of long-lasting brand awareness by working with grandparents. You can track market penetration in real time too.

6. Competition. Jesus or none, depending on your world view.

7. Team. Proven CEO with hundreds of years of experience. In addition, there are Mrs. Claus, non-unionized elves, and flying reindeer including one with a red nose. All work for free with no stock options. North Pole production facilities are also free.

8. Projections. Total addressable market of two billion children. Conservatively, 1% market share means twenty million children.

This is the kind of deal even the most jaded venture capitalist would jump at. Be sure to give me the first shot at the deal if you’re Santa. Merry Christmas!

Just when I was starting to get really impressed with President Elect Barack Obama’s cabinet picks — overall a pretty strong line-up — comes a puzzling choice for the new Administrator of the U.S. Small Business Administration.

He’s chosen a venture capitalist as the head of the organization that is supposed to serve the nation’s small businesses.

News announcements have touted her venture capital background as if it’s somehow a benefit. But is it?

Does Karen Mills’ background as a VC qualify her to head up an agency to serve small businesses?

I’d say “It’s not a relevant qualification — if anything, it’s a negative.” Why? Because the vast majority of the nation’s businesses would never qualify for venture capital. So if you are going to look at it through the lens of doling out venture money, most of those businesses wouldn’t rate a second look from a VC — or even a first look.

Is someone who views the world of businesses as being those that would qualify for venture capital, predisposed to serve the 27 million small businesses that would never qualify for VC money?

Let’s look at three points: read more

I completely understand that some people are either not in a position to save their business or perhaps are doing so well that it’s not worth their time to rescue a business hurt by the economy.  However, I have put so much of my time and money into my projects that I decided I must find a way to “succeed.”

If my “success” is extremely tiny compared to my projections when the economy was strong, so be it. But surviving through the hardest of times would be a huge personal success for me.  I also feel like strategies I learn during these trials may serve me very well in the long run.

“Be Greedy When Everyone Else is Scared”

I am taking advantage of a strategy that stems from this famous quote by Warren Buffet. While he manages a multibillion dollar investment company, and I am practically invisible on the financial scale, the strategy still makes sense to me. read more

You may never try to raise money from a venture capitalist, but unless you’re a trust-fund brat, you’ll probably have to raise money from someone to fund a business. Two pieces of advice before you begin:

First, don’t confuse fundability with viability. Only a few thousand companies a year raise venture capital. These companies are fundable in the sense that they have fooled a venture capitalist into believing that they can achieve sales of at least $100 million per year within five years. Thousands of other companies failed this fundability test—or, more likely, didn’t bother trying to raise venture capital.

Many of these companies are perfectly viable; they simply aren’t fundable, because they probably won’t achieve sales of $100 million/year, which is what venture capitalists are looking for. This applies to restaurants, bookstores, consultancies, blogs, and design firms. Venture capitalists are trying to fund the next Google, Apple, Microsoft, Cisco, and YouTube. Venture capitalists are not trying to help you build a nice $10 million business. However, angels, friends, fools, and family might think this a whopping success.

Second, don’t ask any potential investor to sign a nondisclosure agreement (NDA), because asking them to do so will make you look clueless. Venture capitalists and angel investors are often looking at three or four similar deals, so if they sign an NDA from one company and then fund another, they expose themselves to legal action. If you find an investor who is willing to sign an just to hear your idea, you probably don’t want his or her money.

I’ve never heard of a venture capitalist or angel investor ripping off an idea—frankly, few ideas are worth stealing. Even if your idea is worth stealing, the hard part is implementing the idea, not coming up with it. Finally, continuing the dating analogy, you probably won’t get very many dates if the first thing out of your mouth is “Will you sign a prenuptial?”

These are the characteristics of an attractive and fundable date for a venture capitalist or angel investor.

1. Realness. This seems like a duh-ism, but few entrepreneurs do it. Most entrepreneurs focus on quick flips to an IPO or acquisition. don’t get me wrong: Venture capitalists and other investors aren’t necessarily good guys who want to make meaning and change the world. A simpler explanation is that entrepreneurs who make meaning and change the world usually also make money. Nothing is more seductive to venture capitalists than a company that may have a big impact on the world.

2. Traction. The easiest way to prove that you have a real business is to already generate revenue. It’s one thing to believe your bull-shiitake pitch; it’s another to have customers and cash flow. You show traction, and investors will suspend disbelief. Fundamentally, you’re asking them to take a leap of faith, and it’s easier to get people to jump off a diving board than the Golden Gate Bridge. If you can’t show traction, then at least line up customer references who will really say, “If they build this, we’ll buy it.”

3. Cleanliness. Investors are busy, so you need to present a clean deal to them. Clean means that there isn’t a lawsuit by your former employer contesting the ownership of the intellectual property, or a disgruntled founder who owns 25 percent of the company but doesn’t do anything but sit around and complain. The more crap that an investor has to clean up, the less likely he’ll be interested in your deal.

4. Forthrightness. If you have crap that you simply cannot clean up, then disclose it right away—not necessarily in the first meeting, but soon thereafter. Also, have a plan ready to fix the problems. The worst thing you can do to an investor is surprise her with bad news, like a messy deal with lawsuits and conflicts, beneath the surface of the company.

5. Enemies. Woe unto you who claims that there is no competition. It means you’re clueless or pursuing a market that doesn’t exist. Investors like to see some competition because it validates that a market exists. Th en its your problem to explain why you have an unfair advantage. If you truly have no competition (and I doubt it), then either say that Microsoft or Google might go after you because these companies want it all or provide potential competitive threats.

Generally, in everything that you say, ensure that your results exceed expectations. Deliver a prototype early. Deliver your list of references early. Sign up your first customers early. Close a partnership deal early. Launch early. The only thing you shouldn’t do early is run out of money while trying to raise money. Investors seldom fund ships that are already sinking.

Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition.

One of the ways small businesses are dealing with shifting economic fortunes is finding ways to keep expenses flexible. If you are trying to carve out a new market niche, create a new product line or simply remake your business into something entirely new, fixed costs such as a lease or full time staff can make charting a new course a bit trickier.

Though virtual outsourced labor and flexible office arrangements have been around for a while, these two industries as a whole are experiencing an entirely new round of interest.

Using a virtual assistant to create marketing materials, update websites and even handle customer service calls is a very smart way to keep fixed expenses down. While this arrangement still involves training and monitoring, costs for services can be attributed almost on an as-needed basis.

In many cases, organizations find they can tap into pools of assistants with very high levels of expertise in very specialized areas – something that may be difficult to find or afford in a full-time position. read more

A business angel is a person who provides capital from his own funds to a private business owned and operated by another person who is neither a friend nor a family member.

The typical angel is often described as an older, wealthy, retired, experienced entrepreneur who regularly makes large, sophisticated, equity investments in other people’s high growth start-ups. While a few angels and their investments look like this, most do not.

• Most angels aren’t wealthy; the majority of them are unaccredited investors.

• Few angels are retired; about two-thirds are still working full or part time.

• Most angels aren’t old; the odds that a person makes an angel investment peaks at between 45 and 54 years of age. read more