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Archive for August, 2008

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Weekly Round-Up: Our First PSA!

Friday, August 29th, 2008

-There’s no question that free stuff is awesome. That is, except when it comes to business plans. This week we responded to reader Alma’s question about whether she could get a decent business plan prepared for her small business gratis. Here’s the short answer: no.

-Public service announcement: please change your email address to something that sounds legit and professional before you email potential business partners, investors, or anyone who’s respect you want. BunnyBabe08@hotmail.com isn’t likely to do you any favors with that crowd…

-Wal-Mart may always sell cheaper DVD and chewing gum than a mom-and-pop shop, but we were reminded this week that there’s always one area where small businesses can beat the big guys: customer service.

-The genius brains tasked with finding a way to monetize Web 2.0 Internet sites came up with their most brilliant idea to date this week: just make big banner ads. Like, real big.

-Despite what the business media will have you believe, so far the only thing social networking has proven good for is stalking exes and finding dates. Or so you say, readers.

-As the proliferation of gossip blogs and the office rumor mill aptly demonstrate, word-of-mouth is a powerful thing.

-We ran a bunch of good advice on business plans and starting a small business, none of which we can actually take credit for.

Happy Labor Day!

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Rate The Start-Up Business: ReputationDefender.

Friday, August 29th, 2008

Keeping control of your reputation on the Internet these days has become increasingly difficult. Well, for some of us. That’s because every day there’s more and more information available on the Internet. Your resume? Check. Pictures of you from college? Er, check. Your criminal history? Check!

Scared yet?

If you’re a small business owner, knowing what the Internet says about you is especially important. That’s because you want to make sure it’s fair, accurate, positive, and doesn’t scare customers away. The same is true if you’re an entrepreneur shopping a business plan to investors. Because, let’s face it, you probably don’t want the guy who may write your start-up a check stumbling upon your MySpace page. That might kill the deal.

Enter ReputationDefender, a start-up that just scored $2.6 million in VC investment to help you keep your online rep clean. Specifically, they provide monthly reports that show you what people are saying about you online and they can help take down any negative mentions (provided they’re not on the Better Business Bureau website, for instance). ReputationDefender also goes through pages that aren’t indexed by Google to search for and destroy any wayward slander or other general nastiness.

ReputationDefender has hinged its business model on one simple fact: it’s a pain for most people to get negative mentions about them on the ‘net taken down. They charge $9.95 for their basic service, all the way up to $99.

We like the idea. But what do you think? Is this a service you would use? And are there enough people out there who care about their online rep to keep the business afloat?

repdefender

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So, Social Networking Isn’t Helpful For More Than Finding Dates.

Friday, August 29th, 2008

Social networking is one of those things that everyone says is great for small business—but no one really knows anyone who’s actually done anything really awesome with it. While there’s a slew of sites that offer assistance specifically for entrepreneurs and business people—think Facebook’s Small Business Network and LinkedIn—it strikes us that the sites are still primarily useful for finding old friends and stalking exes. That’s why we decided to ask you, our readers, whether social networking has done anything for your small business or you professionally for this week’s survey question.

While some of the geekier entrepreneurs out there may have successfully used social networking to your advantage in business, we couldn’t find them. In fact, the response from you wasn’t especially positive. Reader Jessica gave it to us straight:

“I have a facebook account and it has never once helped me professionally and I doubt that it ever will…Call me old-fashioned, but I think it’s who you are personally connected to (as in they have spoken with you, respect you, know more about you than what you disclose in your ‘profile,’ or knows someone else who can vouch for your great character)in life that gets you ahead professionally.”

So, maybe trying to friend a VC on Facebook isn’t the best way to “introduce” yourself. Or at least that’s what reader benpirie thinks:

“I try to avoid tainting my professional life with social networking sites. I think this is an area where everyone wants it to work, and there’s certainly potential, but no one wants to put themselves out as an early adopter while there’s still the MySpace stigma. Even once it does catch on, I don’t think it’s going to supplant the handshake as the gold standard of relationship building. For both traditional and practical reasons, there’s no electronic substitute for looking someone in the eye to get the measure of them.”

Please voice all dissent in the comments section below.

Facebook

(Image via BobsBrainDump)

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Another Few Bite The Dust…

Friday, August 29th, 2008

-Fueling further fears that OMG the FDIC could run out of money, the ninth bank this year went under this week. The Kansas-based Columbian Bank and Trust Company, which had $752 million in assets and $622 million in deposits as of June 30, was shuttered by regulators. This story isn’t over yet, though. More banks appear to be in danger of closing as well. Stay tuned.

-Vudu, a movie download start-up, looks like it may be on the brink of going under. They laid off nearly 25% of their employees this week, and ousted their CFO. This comes on the heels of the company drastically cutting the costs of its set-top boxes and offering 0.99 cent movies.

-Travel site TripHub annouced this week that they’re shuttering their doors. The group-oriented travel site launched in September 2006, but it appears that they were unable to get the funding they needed to stay afloat. On their blog they note, “At the end of the day, despite a well-received, market-leading product and early success with strategic partners such as Orbitz and Alaska Airlines, we simply ran out of money to continue executing on our vision.”

-Cadence Innovation, an auto parts supplier, filed for chapter 11 bankruptcy this week. They say the rising cost of goods and the declining demand for large vehicles and SUVs contributed to their fall. The company, which has offices domestically and the Czech Republic says they plan to sell the U.S. arm of the business.

-In perhaps the weirdest flop of the week, Canadian company Zoom Airlines closed so abruptly that they actually left hundreds of passengers stranded yesterday. Fliers in Alberta, Nova Scotia, and Scotland found themselves in a bind when baggage handlers refused to unloads planes because of unpaid invoices. The company’s founders say that they ran out of money, but they’re working to secure a refinancing package. Despite that, we’re guessing the may have lost a few customers…

zoomairlines

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These Days Crimes More Reliable, Lucrative Than Exits.

Friday, August 29th, 2008

Here’s a sordid tale for Friday: a Silicon Valley VC was convicted yesterday of ripping clients off to the tune of $20 million. Moses Joseph, who worked at the Palo Alto VC firm the Anila Fund, swindled more than 13 clients over the course of six years. Those clients included US Bank, Wells Fargo, Eastman Kodak, Bank One, and Silicon Valley Bank. We think Valleywag sums the story up well:

“Yesterday a two month trial ended with a jury deciding to convict Joseph on 22 counts, proving the best way for VCs to swindle cash from investors – even when big exits remain are as rare as they are these days – are their exorbitant fees.”

criminal

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The Devil Has A Name: RIAA.

Thursday, August 28th, 2008

As anyone tangentially involved (and by tangentially, we mean you own an iPod) in the music business knows, the recording industry is brutal when it comes to start-ups they perceive are poaching their goods. We all remember the Napster dust-up circa 2001. And just this past week Muxtape, a site where users can upload playlists of MP3, was such down by the Recording Industry Association of America (RIAA). The scuttlebutt is that they’re after a similar site, 8Tracks, next.

The question, as always, is the issue of licensing and whether these start-ups are allowed to use the material without paying royalties. But even beyond that, it actually seems like the music industry doesn’t want these start-ups to exist. Period. Tech blog GigaOm recounts an interesting anecdote today:

“I was talking to an executive at a major label the other day. We were talking about startups and he noted that they either sue these companies out of business or legitimize them out of business. That is not far from the truth. How many legitimate, standalone digital businesses can you name that rely on licenses from the labels for their primary business and are profitable?”

GigaOm makes a good point. There are only a few legit businesses that actually operate successfully with licensed music, and they’re not start-ups. Apple’s iTunes, the new permutation of Napster, and Rhapsody are the few that come to mind. That’s because the RIAA keeps a tight leash on things.

But does the strategy make sense? To a certain extent, the RIAA’s grip on its licenses seems counterintuitive. The more music is disseminated and heard, the more popular it will become, and there were always be a certain percentage of the population who will actually purchase songs they like. Wouldn’t partnering with some of these start-ups that use licensed music—by charging them a reasonable fee they can afford—make more sense than shutting them down?

There are always going to be new businesses like Muxtape cropping up, and what that means is more legal fees and millions spent battling these start-ups. It’s an exercise in futility. Surely someone over the RIAA has to recognize that.

Regardless, the entrepreneur who comes up with a way around licensing laws (and good luck on that count) or who is able to actually negotiate a low-cost licensing fee with the record labels will have a cash cow on their hands.

metallica

Lars Ulrich of Metallica was so outraged that his music was being traded for free on Napster back in 2001 that he helped shut it down. Frankly we think he should just be flattered that anyone listens to them anymore…

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Customer Service Actually Is Rocket Science If You’re Wal-Mart.

Thursday, August 28th, 2008

“Wendy’s: You Will Have Your Burger With Toppings Or You Will Get Nothing.”

“Wells Fargo Forces You To Pay Off Loans Costliest Way Possible.”

“AirTran Agent Screams, Curses At Travelers While Supervisor Looks On.”

And those are just a few of the headlines from consumer bitchfest/watchdog site Consumerist, where angry customers send in their tales of corporate wrong-doing. The site is packed with complaints about surly employees, retarded customer service representatives, stand-offish managers, and general corporate idiocy. Amidst all the angst and wrath though, is a great lesson for entrepreneurs: no matter how amazing a major corporation’s products or services are, small businesses can almost always beat them when it comes to providing exceptional customer service.

Think about it. The companies that put people on hold for 174 minutes (ahem, Blackberry) or publicly berate customers are almost always corporate giants who employ so many people that there’s typically more than a few rogue employees who wouldn’t know good customer service if it smacked them in the head. This is where small businesses have a real advantage.

When a customer is angry, typically they just want someone to listen, to accept responsibility, and fix it (in that order). Nevermind how simple it sounds. It’s still something big business hasn’t been able to figure out. But as a small business owner, you have a far greater shot at making a consumer happy than a corporation who pays a customer service hack minimum wage to field angry calls. Take advantage of that edge, and use it to better compete with the big guys. If you’re launching a start-up, even stress it as a competitive strength in your business plan, particularly if you’re entering a market with a lot of major players. Remember, angry Wal-Mart customers have to go somewhere…

angryperson

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New Web 2.0 Advertising Strategy: Just Make Stuff Big. Real Big.

Thursday, August 28th, 2008

Despite the popularity of Web 2.0 start-ups like Facebook and YouTube, it’s a well-known fact that nobody’s found a way to actually make any real profits. Given that some of the greatest tech geeks in the world are working on it, you’d think they’d have to come up with an artful, intelligent solution to the problem.

You know, like a HUMUNGOUS banner ad.

No, really. Google-owned YouTube is experimenting with the idea of placing one giant banner ad on their site, reports VentureBeat. They plan to offer the space for $200K, which is the same rate they currently charge for ads, although that amount will eventually shoot up.

Er, clever?

giantad

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Middle-Of-Nowhere Now On VCs’ Maps. Kind of.

Thursday, August 28th, 2008

The rule of thumb for entrepreneurs used to be that if you’re seeking funding from a VC, you either have to go to the Valley or New York. Permanently. That’s changing, according to an article in today’s USAToday:

“Venture capitalists in Silicon Valley once joked that they’d never invest in a start-up more than a 15-minute drive away. Not now.

Increasingly, Silicon Valley venture firms such as Draper Fisher Jurvetson and Sequoia Capital are looking beyond U.S. tech hotspots and investing from Dubai to Dublin. Since 2001, U.S. venture firms have raised $230 billion in venture capital worldwide – with $40 billion coming last year, according to Ernst & Young.”

While we’re not ready to entirely concede that your shot at funding is equally good if you’re based in Kenosha, Wisconsin or Uzbekistan as it would be if you were in Mountain View, California, it’s still heartening news for entrepreneurs in nether parts of the country and around the world. In the meantime, the WSJ’s Independence Street blog (as if on cue), has a list of tips from a Valley attorney for helping entrepreneurs who are not located in California, NYC, or London get funding:

-Try meeting VCs who have invested in your region before. Even if they’re not locally-based, it means they’re at least willing to work with a start-up in your area.

-If you’re not well versed on how the VC industry works, learn it as best you can from a distance. That means researching VC firms, the industry’s major players, and those investors who’ve previously funded start-ups in your industry. Also, don’t focus on the low-cost of operating a business in your area. The primary thrust of your pitch should still be your business’ general awesomeness in regards to profit and opportunity. Trust us, Arkansas isn’t exactly a selling point.

-Seek partners who have experience working with VCs in hotbeds like Silicon Valley. In some cases offering an “above-market” deal for their participation can end up working out to an entrepreneur’s advantage – particularly if it helps attract funding.

Do any non-metropolis-based readers have any thoughts on how to attract investors? Share in the comments section below.

middleofnowhere
Okay so, they actually might have a hard time getting funding.

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If It Sounds Too Good To Be True, It Is.

Thursday, August 28th, 2008

It’s Thursday, which means it’s time to share our kernels of business planning wisdom. This morning, reader Alma asks a good question: “How can I get a business plan prepared for free no joining something or hidden clauses? Or a free seminar for the same?”

First, the bad news: if you want a quality business plan (and trust us, you do), you can’t get it prepared for free. While there’s a myriad of businesses and consultants on the Internet who claim they’ll develop your business plan gratis (just do a quick search for “free business plan”), their claim simply isn’t true. You’re wise to realize, Alma, that there are fees and hidden costs associated with such services.

There’s a reason, though, that it’s difficult—if not impossible—to find a consultant who will create a business plan for free. That’s because developing an exceptional business plan, the kind you need to get funding, takes hundreds of hours of work, research, and number crunching. The old saying that “you get what you pay for” is absolutely true in this case. Even if you were to find a company who’d create a free business plan for you, chances are it would be so shoddily done and of such poor quality that you probably wouldn’t want to use it anyway.

Given that, you have a few options. If you want to do the business plan for free, then you”ll have to do it yourself. Fortunately, there are free resources on the Internet that can help walk you through it. That inlcudes sites (ahem, like ours) that offer entrepreneurs like you free business plan templates that can make the process easier. Business planning software is also available, although these programs typically cost a few hundred dollars. The good news is that if you hit a roadblock or need extra help, SCORE, an organization affiliated with the Small Business Administration, can pair you with a counselor (many of whom are former executives) who can give you advice and direction for free.

We’ve said it before, but it’s a good rule of thumb to remember: there’s no free lunch in business.

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