Archive for the ‘Start-up’ Category
There are also 3 articles in this blog under the topic of OLF which cover the presentation in an easier to digest format and if read in order of date posted should closely match the slide deck. They are:
There are lots of other articles here that can also help you as you start a new business, so feel free to look around while you’re here and leave comments or questions.
When I was little, I use to tag along with my mom as she would pick up things for her garden. My favorite stop was Agway, because, in the spring they had brooders full of baby chickens. Although my mother never, ever, indulged my childhood need to snuggle an arm full of chicks, now that I’m the Mom it’s a different story.
In the spring of 2009, we took the plunge and purchased 8 chicks from a local farmer. Like any other venture, we needed more than a box of peeps, but, while the birds were only slightly larger than the egg they hatched out of, they didn’t need many of the things a fully grown hen would.
So, instead of rushing out and buying loads of stuff that would just sit in storage until the gals were big enough to use it, we adapted to their needs and only invested more into their care when it was the right time to do it. While they were small and still needed the heat lamp to regulate their body temperature, they lived in a large cardboard box in the family room. When they got large enough to jump/fly out of their box and poop on the carpet, we built a coop and moved them to the back yard.
This spread the expenditures of time and money out, over time, so that we could better absorb the costs.
We also learned as we went along. I got a great book, Storey’s Guide to Raising Chickens, and picked up a few tips and tricks from the internet and even learned a few things the hard way, but now we have all the eggs we can eat and a self-sustaining supply of new laying hens. When we had hens go broody after their first year, we were given some fertile eggs for the ladies to hatch. From those fertile eggs, we kept a Rooster. This year we just welcomed our first batch of home-grown babies.
I could keep the process going, if I wanted, and allow my hobby of back yard chickens grow to the point I could start selling eggs to my neighbors. Then grow to enough hens I could get a stall at the farmers market. I could then let the dream grow to certifying as organic and winning a contract with Whole Foods… Or not.
The formal term for this process is bootstrapping, but the process works equally well in small business as it does with back yard chickens. When considering how you want your next business to unfold, consider the slow build as a way to gain both resources and knowledge you need to ensure a successful venture.
Not all entrepreneurial ventures need to be grandiose, million dollar money makers. In fact, many of the successful entrepreneurs I’ve worked with over the years are moonlighting in small businesses to help fill gaps in their family budgets. A part-time business might be just the thing you need to bring in a few extra dollars for your family too.
Starting a business for your spare time also has some major advantages. For one, you don’t have to quit your day job so your regular paycheck and other benefits aren’t going anywhere.
Second, starting a small business in your spare time allows you to bootstrap the business. If your goal is to earn extra money, starting with a small amount of seed money, allows the business to grow at a pace that is equivalent to the money you earn so you invest in the business instead of making loan payments. Plus any money you don’t pay the bank for interest on a line of credit is money you get to keep.
When thinking about what kind of business you might be able to bootstrap in your spare time, I would suggest you start by evaluating your current hobbies. My guess is that you probably already have a basic kit of tools and know a little about the industry which will make the jump from hobby to business easier. For example;
- Festivals – If you love going to festivals in the summer time, consider becoming a vendor. Since you know what events are planned and what is usually offered, you could find a niche novelty food or product and set up a table. (Like the Kettle Corn tent in this articles masthead)
- Second-hand items – If you simply can’t pass a good pile of junk without picking up a few treasures, consider re-selling. Options include selling vintage items on Etsy, eBay and other sites online or getting space at your local flea market.
- Teach a class – Maybe you’re a world class knitter or have another special talent you can share with the world. Sites like Betterfly and the lessons section on Craig’s List can help you find customers.
- Hunting and Fishing – Since you already know all the best spots in the area, why not let someone tag along?
- Repair services – take all those pleas for help you get from your family and friends and set up shop repairing computers, small engines or anything else you know you can fix.
Of course the list is only limited by your imagination.
One pitfall of turning a hobby into a business is to change your mindset about what you’re trying to do. One common mistake most part-time business owners make is treating the business like it’s still a hobby.
Learning business basics isn’t limited to those who want to quit their job and start a new career. If you want to keep what you earn, and grow the business you’ll still need a plan, know how to keep your books and keep your fledgling business from faltering along the way. You might also have to get insurance, permits and collect sales taxes.
The good news is that most of this can be learned in the Hard Knocks Business Academy. I’m also here to help you along, so don’t hesitate to contact me or schedule an appointment (the first appointment is always free)
Every break my children have from school, we make the trek from Rochester NY to Clio Michigan and spend our vacations working on projects that will bring us closer to our eventual move. This week, we finally brought the first load of our belongings and in between wind and snow storms, we managed to get our internet connection installed.
While talking to Mike, the Comcast installer, about our need for bandwidth so we could keep up with business tasks in between trips to Goodwill and cleaning the gutters, he mentioned that he liked working for a big company because he had benefits like Health Care.
While it might seem like a casual comment, it speaks volumes about the state of our economy.
Small Businesses account for more employees and a larger portion of the US GDP than all large companies put together. When it’s hard for people like Mike to leave health insurance behind, health care becomes a barrier to economic growth.
Now I’m not saying that Universal Healthcare is a silver bullet for the economy, because losing a steady paycheck and is also an important consideration, but what if health care wasn’t one of the barriers to entry into small business ownership?
Yesterday, I had an opportunity to attend a workshop just for SCORE counselors where we went over the Financial Projection model that we use as part of our Simple Steps workshops. It’s not that I or any of the other counselors can’t “run the numbers,” but I, hadn’t used this particular tool and wanted to be sure I could use it if asked.
My first impression of the projection model was that it was probably overwhelming for most would-be small business owners. Running the financials are scary enough without seeing 21 sheets of calculations. Though now that I know more about it, I see that 21 pages isn’t 21 pages. A lot of the sheets are the final numbers and you just need to fill in the blanks, where required, to have a Financials section for your business plan that will knock your bankers socks off.
It couldn’t be easier to get started with. In fact, if you start on the first sheet, the basic directions are given then, there’s only one box to fill out.
The template also has a convenient color code for you to follow. Color within a cell means you should add or modify information. The white areas are where the auto-magic calculations occur and those area’s are protected so you can’t accidentally foul things up.
Yellow cells are the areas where you should put something in the box. It’s loose requirement since you might not always have a number to enter. For instance, you might not need any money for business travel, so it’s alright to leave it at zero.
Green boxes are areas where you can add modifiers that will ultimately give you a more accurate projection. If you know the interest rate on your loan or the life expectancy of your equipment, or have other insights, feel free to add them.
The trick of creating an accurate Financial Projection is knowing that you don’t just sit down and fill it out. It’s a work in progress and could take more than an afternoon to complete. Expect to find items that you don’t fully understand.
There will be some things you know and can easily add them in the right spots, but you’ll probably stop after each addition to research the number for the next cell. You should also be prepared to ask questions when you’re stumped or don’t understand the relevance of a particular portion of the financials.
This Financial Projection model can also help you determine your profitability and avoid too many losses by easily modifying your numbers. As the counselors ran through the projections for a faux bakery yesterday, we initially budgeted $15,000 for a delivery van. Later on though, we began questioning the need for a van when our profitability looked slim. Then again, all of our numbers were made up, so we had a little laugh about showing positive cash flow at all.
For your projection, using real numbers, it should be much easier to spot the weak points and determine if they can be overcome. If they can’t, be glad that you know that before you sink your life savings into a business that will never earn it’s keep.
If you have any questions or comments about using the spreadsheet, feel free to leave me a note, below that way we’ll all learn more about the process. Otherwise a tweet, Thumbs up or sharing on your favorite service would be greatly appreciated. ~Karlie
If you’d like to run some numbers of your own you can download SCORE’s “Simple Steps Financial Projection Model.” And don’t worry, you don’t need Microsoft Office for the template to work. I used OpenOffice.org which is a free download for Windows, Mac and Linux users, or if downloading isn’t your thing, you can order Open Office on a disc.
In my adult life and with my small business, I’ve had to constantly worry that I might miss an important anniversary like a birthday or a contract renewal because I had no frame of reference for the last time said event occurred.
If you ask me about an event, I can tell you who was there, the topic and even small details that usually go unnoticed, but I won’t be able to tell you when it happened and in most cases I’ll probably have the order of events out of sequence too. In fact, it use to get me in a lot of trouble as a child because I was “telling stories” if I didn’t quite have my details in a nice neat package.
Since it’s obvious that my brain just doesn’t work when it comes to dates, I’ve worked to find ways that my other odd traits could pick up the slack. Since that’s a cumbersome way to put it, I like to think about it as tools.
Whenever I’m faced with tasks that are naturally difficult for me, I put in a little extra effort so that I can create a work-around for the next time the problem comes up.
It’s safe to assume a Calendar is a tool I use a lot. I use it to remind me of upcoming events, and as a journal so I can look back and refresh my memory. I also leave myself little clues so that I can deduce the dates of important events. You might even think my collection of conference badges as a bit odd, but the ones I have hanging on the wall in front of my desk all have dates on them.
These little routines and trails of bread crumbs may seem like the failings of weak mind, but the reality is that it allows me to focus on the things I can do well. I don’t panic because I don’t remember, instead I’m confident that I can find the answer quickly.
As a small business owner, you should also be thinking about the tools that will help you be more efficient and reduce your stress. Do you need tools for time management, Email management or something else? No matter what it is, putting in the time now to create a tool you can use again and again is well worth the effort.
I’d love to know about the tools you use to keep on track or solve problems in your small business. Please leave your suggestions or questions below.
The first issue is that software is a cost center, and ROI to shoot for is some sort of increased efficiency. Regardless of how efficient it brings in customers, tracks inventory or creates slide decks for presentations, you have to have it to compete, so it all comes down to how well the system works.
The good news is that publicly licensed software allows businesses to think about starting their software roll out with the finishing touches. Carrying a General Public License or other Open Source License is the most important part because, it’s usually available at no cost.
If getting it for free isn’t enough of a cost savings, then stick with me for another moment.
Custom software is usually the best way to get a system that works exactly like your business model dictates, but the costs grow exponentially. The more complex the system, the more it’s going to cost to build. But it doesn’t end there, I usually recommend my clients assume an extra 30-50% above and beyond the initial construction phase for tweaks, bug tracking and resolution. If you start with a lower cost, then your 30-50% is also going to be a much smaller number.
In some cases fixing a bug in the system could also be free if it’s submitted to the software’s development team. It might take a little longer for resolution, but it’s hard to argue with free if your budget is tight.
With a little research it’s usually possible to find finished software suites that are close enough to meet the business’ requirements and development can begin where a custom solution would just be finishing up. A good software developer can even combine functions that may not have been designed together to create a truly custom solution.
The library of software that’s publicly licensed these days is vast and a business that wants to go this route should start the research process by outlining what functions the software must have. I also advise they look at what might happen in phase two of the roll-out and to consider what flexibility they’ll have to modify the system to adapt to changes in the business environment. A good plan and a shopping list of features goes a long way to making this process successful.
In my previous posts, (1, 2) I’ve been talking about why Small and Medium Sized Businesses (SMB) need Linux and Open Source solutions. I’ve also talked about Open Source industries. But what we haven’t covered is getting in the game.
While I could go high tech here or dazzle you with business terms, the truth is, going into business only requires that you understand the ground rules.
Think of it in terms of poker or any other game. Yes, it might take you a while to develop the skills you need to be really good at the game, but one of the most important steps is learning the rules and understanding what makes for a winning hand.
No matter how unique your method of doing business, or your business model, you will need to pick up the basic skills and techniques. But just because you may not have a full tool kit at the outset doesn’t mean you can’t get started. Especially if you surround yourself with people who have the strengths you need.
The really good news is that you can get the basics lots of places. There are countless business resources online and many in your local community. If you’re in the United States, SCORE offers free business counseling and low cost workshops and the SBA sponsors Small Business Development Centers (SBDC) where you can also get free counseling and learn the basics of writing a business plan, accounting best practices and other essential skills.
Where you’ll find it getting tricky is getting past the no-cost mindset when you, and your clientele, begin thinking about free software solutions. I can tell you that the early years of my FOSS business were rough until I figured out how to properly position ourselves in the market place.
Our business model needed to be tweaked more than once to be sure our potential customers could see the value in doing business with us. In some cases we raised our prices, others we lowered them. In some instances we dove into the marketing plan, hammering out little details and studying our customers.
As I have branched out and helped other FOSS projects think about their positioning I’ve found the biggest issue is marketing messaging. You see, it isn’t about what they wanted to say about their latest and greatest update, but about what the customer needs to hear.
While that statement could be interpreted as the sort of thing con-artists do, it’s not about trickery, but about point of view.
Think about it this way… What are the key things high level geeks think about when it comes to setting up a new computer? Processor speeds, RAM, Kernel version, getting the proper video drivers and all those other spec sheet gems.
Now think about what a business owner wants to know. They want to know how much it’s going to cost. Is there going to be any down time? Will their employees adopt the new tech and use it effectively? Who’ll be able to solve any problems that may arise? Why should they trust that a free download isn’t going to be a lemon? If it’s so great, why is it free?
My best advice, DON’T Underestimate the importance of re-programming your thinking so that you can step away from the for-geeks-by-geeks FLOSS marketing that you’re use to seeing. If needed, find someone familiar with FOSS and SMB speak to translate for you.
The reality is that the barriers to starting a successful business aren’t that big if you’ve got the right mindset going in. Again, a good team of advisers can help you overcome any portion of the business process that you have questions about. The rest comes down to your skills and ability to get the job done to your client’s satisfaction.
If you ask a software developer how to make money writing code, you’ll usually get employment or selling applications as your answer. It’s my opinion, however, that most are missing the boat and need to think of their skills as a marketable service.
The other answers, while not wrong, have to do with point of view.
If I get a fancy box and shelf space in the big box chain stores, then I’m offering a product. The transaction might even present itself as selling of services – like getting the neighbor kid to mow my lawn. But no matter how you look at it, it all starts with a skill.
If I toss Open Source software into the mix, then I usually have to deal with “Yeah, Right. How am I going to make money competing with a free download?”
Here’s the thing, software isn’t the only Open Source industry. In fact, many other open source businesses are very profitable and are generally skills that have been around for quite some time.
Let’s think about Open Source for a moment. The first line of the Wikipedia article states…
Open Source describes practices in production and development that promote access to the end product’s source materials.
To me, it’s just the way we’ve always done things.
Software isn’t the only open source skill, in fact I’d say that all of these could be considered open source.
- Repair – Automobiles, Washers, Refrigerators, etc.
- Fashion – Sewing, design ideas, etc
- And many others
The people who practice these trades might have their own secret sauce, but all can be learned in an open source manner by examining the construction or using freely available information to gain understanding of the process. If I can get a book at the library or search the internet for the information I need, then I consider the industry to be open source.
Let’s now consider what it means to be in an open industry where anyone has access to the tools and materials that you do…
Wouldn’t the existence of prepackaged seeds put farmers out of business?
What about home improvement stores? Shouldn’t that put Plumbers, carpenters and electricians out of business? Does access to scissors put the barber out of business?
With the answer to those questions being a resounding “NO,” then why do so many people within the Free and Open Source Software movement think that there’s no business opportunities for their skill set?
Yes, there is a bit of a vacuum in the consciousness about the use of Open Source software, but I don’t think that it’s going to be too hard to overcome.
What the middle market is missing people with marketable skills who are willing to begin offering their services in various formats. It could be shelf ready products, it could be custom work. FOSS could even be offered alongside commercial options.
The thing is, FOSS has so many advantages and one of them is price. If you are a provider and can offer the same services and functionality, but you don’t have to undercut your profit to be the less expensive option, that’s a big advantage for you and your customer.
So you make more money, they spend less… Talk about bringing value to the table. You’re happy, they’re happy, the computers are effective. How can you loose?
To keep this post on topic and in an easy to digest format, how about we stop here for now.
In the next article I’ll talk more about how to position yourself as a service provider and how to set yourself up for a win.
It’s become quite clear to me that I’ll never fit all I want or need to say about the business of Linux in my LinuxCon talk. In fact I could make it a full day workshop and still not cover everything there is to know about making money on products your customers can get for free.
The solution is to begin evaluating what information really needs to be in the presentation and what would be better here. In some cases I’ve begun shucking slides from the deck and for others I’ve decided that there needs to be a better explanation of what I’m trying to cram into my allotted time.
With today’s post I’m going to start addressing some of the topics that could use a little more depth than what time will allow. I also hope that by exploring the topics here I’ll have a better grasp on what is most important to convey when I stand at the front of the room next month. ~Karlie
Midmarket Companies are the Key
Less than a month ago, eWeek published an article titled “Midmarket Companies Steady on PC Purchases, Report Finds.”
This article is based on The NPD Group’s Small and Medium size Businesses (SMB) Technology Report.
As you can guess from the name, the midmarket is made of up of companies who sit right between Mom-n-Pop operations and big businesses. They’re generally smaller than 500 employees and actually make up most of the US economy.
The first bullet on the slide above is fairly easy to understand – Buying is going up this year. While that’s good news, it’s the next two that set my heart all a flutter. They show me some really good numbers – Let me explain.
The biggest reason I’m in a very good mood following this report is that the percentages give me a starting point for basing a financial model off of.
Yes, 40% is less than half, and on first look can seem sort of dismal. The thing we need to understand is how big that 40% could really be.
According to the US Census Bureau, there are nearly 5 million businesses with 499 or fewer employees. So if we do a little math, 40% comes out to be approximately 2 Million potential clients. It could be even more if you set your pool to include business with over 500 employees.
We also need to factor in that the estimated market share for Linux is just about 1%. If we assume the market share is the same with SMBs, we’re looking at about 20,000 firms to get your feet wet with.
I’d also go out on a limb and suggest that if SMBs began adopting FOSS technologies that 1% market share for Linux would rise rapidly. How far? I don’t know exactly, but for every percentage point it jumps you’d be looking at another 20k or so in your national customer pool.
The lesson here is not to get hung up on what constitutes big or small in the business world, or even take a percentage at face value until you understand what those numbers actually represent.
20-Thousand businesses may not seem like that many either, but could you handle that many clients? Probably not while you’re just starting out, so 20k is really a fairly large number for you to grow into… Especially if you can grow the Linux adoption rates while you’re at it.