Ok, so you have finally figured out the key assets and are starting to go down the road of making your new web feature happen… well let’s just say you are only 20% towards the finish line.  There are some major hurdles involved for most of us, including even the big guy or gal at the top.  The thinking part of discovering ripe juicy revenue or visitor producing features is the easy part.  The difficult part is making it happen, navigating the human beings all along the way, especially when you know they are all trying to make sure you either fail directly, fail indirectly, fail just by the fact that you don’t have the energy to fight anymore, fail because you left the job or fail because the job left you.  It is a fight to the death my friend and its all because you sorted through the company assets with a flashlight at night when nobody was looking and you had an idea, you brought it into the daylight, and now you are a pure unadulterated target for those who don’t want you to succeed.  So how do you proceed  in the most murky of environments…

Social Engineering

I first began to understand social engineering, when I was reading a great article about Kevin Mitnick, the infamous hacker who broke into Sprint and stole tons of information about their customers.  He was not genius.  He was not very technical.  He was basically a petty thief.  How did he do it?  He used social engineering.  If you think about it, social engineering (in the Mitnick version)  is about figuring out how to use information and people of an organization to think what you want them to think and do, using that information wisely.  Mitnick figured out that when executives names where mentioned, people lose their minds and do what you want. “Uh, Dick Lynch the VP said we need that report now!”   Minick found out that if you know some small piece of information or just a name, you could easily navigate an entire organization, call around to people and they would hand you off like you were a friend.  He would use person X’s name and say hey person Y, Person X recommended me.  What really did is say the VP wanted me to get onto System Z, now so get me a login and password…

The point is, you need to understand the dynamics of the organization, the motivations of people in the organization and the hierarchy of decision-making.  Getting the organization on board with you is what I am getting at!  But ultimately, like I have said before, you can take the high road or the low road.  Taking the high road means bring the organization along on a ride towards success (success means getting your feature implemented).

Education Camp

Sometimes unusual methods are needed in order to gain the trust of execs and the whole organization.  For instance, some of the features I was trying to get implemented at my last company required me to make sure that the organization understood the features. What did I do about it?  I ran a seminar.  Now people in my company who came to my seminar looked at me in strange ways as I ran them. Once again who was I to run a seminar?  I was just a programmer there, sometimes a manager, but in no way did I have the keys to the kingdom or really was in charge of much there.  Fellow employees would look at me with confused looks. Who was this guy standing up there talking about things?  I ran periodic internal seminars at the office.  This means a short 45 minute talk, on WordPress for instance.  I ran a seminar on Whois.  I was planning a seminar on a variety of subjects. What was I doing in my crazy convoluted method was starting the social engineering process by planting seeds through my seminars.  I wanted this company to adopt certain strategies and methods.  Once again, nobody stopped me from running a talk at noon time in the conference rooms.  This is a great place to flesh out your ideas and don’t freak if someone shows up to show you up.  My answer to them would be, show me how to do it better!

Plan 32

One thing that a great product manager should always have is a pile of ready to go plans in their back pocket.  You have all the plans (I mean PPTs, Power Points) that are company planned, on the so called “Road Map”.  Actually I am going to digress here and tell you that if there is a Road Map beware!  The kind of process and thinking a Road Map can create can be a real negative, because from experience nay-sayers love to use the Road Map as a way to block new Road Entrances. Never let the Road Map not allow the process to be re-prioritized and redeveloped.  I have yet to see the Road Map (in the web feature world) be the best guide.  Now, as far as plans are concerned, you have the top line plans already planned out from the execs and board.  You have the plans that others know about that you are promoting, and you have a dozen others that they are not aware of, but you have them ready to go, in standby mode, in a file on your hard-drive or cloud, just in case the time is right.  Why the three types of plans?  Well, part of succeeding is not giving it all away too soon.  You have to release plans periodically to the organization, who can’t handle all the plans at once.  They have to be part of a series of changes over time.  Once again, as a champion, of a lot of other people’s ideas (OPIs), you need to map out these features properly and get your presentations just right. Sometimes you have to sit on things and let osmosis occur.  You wake up some morning and your brain somehow figures it out.  Who knows why things work that way, but often they do.  I would highly recommend sitting down with all the guys and gals who thought them up and show them where there idea is now!

The Shadow Government

Sometimes all the education and all the presentations and all the board room brawls are insignificant compared with the reality that something has to be done subversively.  It is a rare thing to do, and there are some well documented cases where it is a necessity.  A great example is the case of the James Cannavino at IBM.  I read a great story about Jim in the late 1960s trying to convince management that he could speed up the IBM Mainframe.  They rejected his notion, but in a subversive move, he had the technology developed outside the company and when it was finished went over his bosses and showed it to the board.  He faced either being fired or being promoted.  Luckily he was promoted.  Hopefully it doesn’t come to this, but sometimes getting things done in an organization require unusual activity, because like I have been inferring there are many more forces at work trying to not make things happen than happen, even on the smallest scale.

Project Mercury

Those funny project names, that often mimic Nasa project names are not just wild imaginative words that are spread around at a company.  They are used to get your attention, to try to get the organization to recognize a plan.  These project names may sound strange and odd, but customer oriented, improved website features are often a shift and they may seem quite odd at first.  Social networking stuff like Twitter and LinkedIn and Facebook. These are now household names, but 10 years ago they would sound strange.  And it is only going to get stranger.  When I say Tweet, Joomla, Droopal, lamp or soap to people in the web world, they better know what I mean…  What should be happening in most American web firms is an injection of militarization combined with humor and something to spice it up.  That’s what a project name is all about.  If project names are not attention-getters, they should be.  I would always try to make the name relevant, but a good bit of creativity is a positive not a negative.

Misdirection And The Book Of 5 Rings

Talking about military tactics, people’s military training can go a long way in corporate America.  Just because I was not in the army, doesn’t mean we can’t learn from military tactics.  They are important. At the end of my MBA program I took a class which revolved around Musashi’s “The Book Of Five Rings“. Musashi is a Japanese expert on war in the middle ages who survived to his old age and therefor, because he was only one of the very few warriors to survive, he wrote about his tactics. One of the tactics listed is a method of drawing an enemy towards oneself and at the last minute let the enemy run themselves off a cliff.  In our language we call it misdirection. Sometimes you have to lead people down a path and not stop them from their self destruction.  Often your plan has one way of doing things and another person has their plan.  If you see their plan is faulty you don’t always have to stop it from failing. Sometimes it is best to let it fail.  When I worked back at the phone company we used to leave documents around about projects that were never in existence in order to confuse people about what our real intentions were.  Sometimes it is important to not reveal these intentions until you are ready to present and make it happen.

This the second of a 3 part articles. I have not  yet finished article 3 about Making the Web Feature Happen.

This is the first article (You should read them in order)

http://www.strategicpoints.com/2011/06/22/web-feature-discovery-process-part-1/

Your GMAT Score Is Inversely Related To Your Ability To Run Your Own Business

Your GMAT score is inversely related to your ability to run your own business.  I stole this line from a book I read years ago on how to survive the Harvard business school. Yes, it is true that MBA programs train people to work at companies and deal with big company issues.  It is also true the degree is a generalist degree in many ways, kind of like an engineering degree.  What you learn in school is not what you are going to be doing in real life. And it may actually be true that those who go to get their MBA are often not able to start and run their own business, but when I ask entrepreneurs if they could have an MBA right now to assist them in their business and their answer is always yes.  It is always better to have more education.  I would get a PHD, if I had unlimited money, time and resources.

More Learning Means More Money

If you do some research, like here, you will find that the more education you get, the more you earn in general.  Obviously we would all love to start a company and make money on our own working for ourselves, but the statistics say that overall getting more education means more money.  It is a simple principle.  Also, not everybody can go off and start an Internet company.  There are as many failures in online business as there are offline.  It is easier and faster to start a business online and thousands of new websites every year prove it.  You can’t knock people from trying, but don’t argue this start-up method is an alternative to an MBA.  You can have an MBA and be in a start-up, in fact that combination is more powerful than a start-up founder without an MBA.

I Went To Learn

My MBA education was not about the degree.  Well, it became about finishing the degree in the last year, but overall, it was done over time, at 2 programs and I literally took my time and made often my class work about my day job.  This was not about the degree in my mind, it was about my mind.  I think it is important to learn and not just be handed a piece of paper.  One of the issues that speaks broadly about this, is the lack of ethics among MBA grads.  Well, if they are not about learning, and just about the degree, what do you expect them to be like.  There are many with no scruples, no ethics and why do we often hear about guys like Madoff attempting to run a scam.

Education Realization

I recently had a epiphany not about my own MBA, but about certain pillars of my own learning in the past 10 years, especially about the web.  What I realized is that there are probably a dozen foundational areas of being an expert on websites, such as web design, web programming, web analytics, business development, product management, email marketing, search engine marketing and organic SEO.  What I realized is that you can be an expert in one of these areas.  Once you become an expert, you will find that your desire to learn more in that specific field may top out, especially after many years in the field.

This just means you need to get knowledge in the other areas, if you work in the web.  Our brains can handle the same thing day in, day out for just so long.  And learning something new does not mean giving up what you know, it means building on what you know by learning a new area, especially if it is related. Maybe I am nothing like the rest of the web workers out there, especially if their answer is I am happy knowing my little silo of information and that’s that.  This is a rare person, and in fact, this kind of person is the perfect company person.

Ford’s Assembly Line

If you look at the original concept of Ford’s Assembly Line and why it was so ground breaking, its because of specialization.  Each person in the factory would specialize in one small area of the making of the car and just do their job.  I probably would have quit that job at some point, or maybe I would have moved around the plant and worked on the fenders for a while.  I need to get around and learn more about different areas after I master an area of business.  I had for the longest time been considered a web analytics expert.  This expertise, which is somewhat uncommon in the market, is in my opinion, not an end unto itself, but one of many disciplines needed to truly understand the web.  It is foundational.

The Designer Becomes The Programmer And Vice Versa

I have actually seen web designers start out writing a few PHP programs here and there and turn into a full time programmer.  I have seen designers become directors and engineers become writers.  We seem to migrate towards not what we know, but what we are good at.  In fact, maybe initially we did not even know we were good at these things, but when we found out, by chance, that we were good at it, be decided to like it.  I stole that idea from the New York Times article on why Chinese Mothers are superior (They make their kinds learn something.  They say be good at something, and then one day you will learn to like it!).

Web Education

Let’s face it, you can get an education on any subject in like 15 minutes today.  I use Youtube.com when I cook and watch videos on how to make Indian food.  I use Instructables.com to figure out how to do this or that.  I research facts that make me as knowledgeable as any doctor, on certain matters, in a matter of minutes. I even found out at a retail outlet going out of business recently, the approximate value of a painting on the wall, before it was sold to me.  We are empowered with the ability to discover and learn at a moment’s notice.  Think about the impact of this on future generations who will have an answer to any question imaginable in a second.  Still the web doesn’t give us the core part of an education that we get in the classroom, and that is working in teams, directly with an instructor that can’t exactly be mimicked online.  The day is coming with Skype, Wifi and iPads where this will not be true anymore…

The answer is no.  This “you have to be in these three cities” is not a prognosticator of success, but rather the possibility of receiving venture capital for an Internet start-up.  And venture capital is the fuel that makes big or decent size Internet software ventures run. But from listening to videos of successful start-ups out of the San Francisco area, it would seem that it goes way beyond just venture cap.  It is finding the management, getting the right employees, having the right legal work done.  And it seems this is just the way it is.  I think if you are wanting to be a start-up and you are in Kansas, South Florida, New Mexico, or Maine, it just means you have to focus back on either boot-strapping, self-funding, using Angels, or try the long shot of getting backed from another interested firm, like Google Ventures.

In South Florida recently, we’ve heard that Cross-Bow Ventures is no longer in business in Palm Beach County and that there really is not a lot of VC dollars to go around in the south east at this point in time.  This means that trying to raise certain amounts of capital will be nearly impossible unless some new funds start to take up the slack.  It could, however, point to a major problem in South Florida trying to raise capital.

If you are reading this blog post, you are either interested in the process of acquiring a $25k loan, because you are thinking of starting a small business, have already started the business, are a regular reader of my blog, a friend or relative.  If you just found this post by accident and just like reading this just, well, good for you!

First, let’s start by analyzing whether or not  you need this loan.

Are you starting a business that can use the $25k effectively?  This means, for instance, many businesses are needing a lot more than $25k.  I guess even if you are looking for $2 million to start your business, having $25k is a start.  It would typically pay the legal fees, business costs, etc., that you need to get to the $2 million. If you are seriously getting the $25k because that is all you need to start, like a consignment shop or a hot dog stand or a small franchise then this is probably the way to go…

I will get into the positives and the negatives with this type of loan and how I felt the wrath of banking,  a feeling you apparently aways get, in getting a business loan.  One question, a very important one, is can you afford to pay back the $25k?  This means is your idea or current business viable, does it make money or lose money, what is the break even point, and will it have the cash flow to afford the monthly payments.  The loan I acquired was for 7 years, so this is a good amount of time to pay it off.

One thing a lot of entrepreneurs think is “I don’t want this debt”.  Let’s say you can live without this loan, because you have $50k or a $100k in savings or a 401k plan.  Well, don’t break open the 401k plan if you don’t have to.  Keep your money in the bank is my feeling, especially since you have to separate business and personal money. They are 2 separate issues you see as I discuss this. One of the best issues behind the SBA $25k loans, if you get the loan, the loan is not personally guaranteed.  You need to qualify in terms of credit and many, many other issues, but once you get it, it is not like you are personally responsible.  Your business, however, is responsible.  So if your business fails, the business will be in trouble with the loan, not you.  Important reminder, remember to set up a corporation if you need a loan, because if you don’t have an S corporation or an LLC you will be making a big mistake.  Like many gotcha’s in this article, that is a big one.

That said, even if you have the cash on hand, here is why you should get the loan, especially if you are a startup:

1. You are a startup, having a source of cash for your business is always a smart move, especially with a decent term and rate.
2. This “express” loan is only for startups.  If you are in a failing business and are thinking of starting a new business to get this loan to help your business sliding out the door, stop right now.  That is one of the red flags they look for.
3. This type of loan is great for establishing credit.  A guy I consulted with at SCORE once told me to get credit early on in your business.  It establishes credit to get larger loans down the road.
4. You don’t have to give up equity in your business.  There are pluses and minuses to this, but having an investor is a guy or gal looking over your shoulder.

So, let now tell you about all the crap I had to go through to get the loan.

I first contacted the SBA. You can just go to http://www.sba.gov and on their website find a local contact or office.  They are most everywhere.  This is the first step.  Going directly to the banks will not be the right process.  You need to get SBA consultation to get this loan!

Once you contact the SBA, typically you have a call or meeting with an SBA advisor. They will confirm for you if you are ready for a loan.  If so, they will recommend a bank and give you all the contact information you need.  They will also tell you the ins and outs of getting a loan.  They will give you a song and dance about how hard it is to get money for a startup business these days, and if they are a good advisor they will tell you how easy it is to get this $25k loan, as long as you quality.

Next  you contact the bank.  You will shortly find out if you qualify for the loan.  If you have anything wrong in your life, such as a felony, bankruptcy, foreclosure, bad credit, and a litany of other problems you are probably not getting this loan.  If you are a government employee, an SBA employees, have gotten this loan before, defaulted on loans such as student loans or are a party to a major lawsuit, your chances of getting this loan are diminished.  If you have any of these problems, kiss this loan goodbye.  Sorry about that, but there are other places to get loans.

Once you get the banks attention they typically, or immediately ask for a financial disclosure form.  This means telling them about all your assets, all your loans and all your monthly payments.  They will ask for a credit check.  If you are below a certain level, I assume they will raise the rate possibly.  This form needs to be filled out for you and your spouse, if you have one.  They need to know about YOU, and the potential risk level you pose to them.

Next they give you a list of about 10 things you need.  Having these in advance of the process, really, I MEAN REALLY HELPS…. They are what is required:

1. A business plan with about 2 years of projections.  I have a feeling this is a problem for many people.  But they understand you are a start-up…  If you have a buddy who has an MBA, ask them to help you out.  Doesn’t have to be fancy, but you need it.
2. Incorporation Proof/Papers.  If you lost mine, well, thank god, in florida they have an online way of downloading a copy.
3. Signing Forms to release  a summary of your last 5 tax returns.  If this is a problem for you, because I have been back 3 years on getting my taxes filed, you are in for a big problem.  Get your returns up to date before continuing with this process.  You will not get the loan unless they are up to date!
4. Your EIN, your Federal Tax Id and a government document proving you have one…  This one was a pain in the butt for me.  I did not know where this was.  If you don’t have one, contact the IRS and get one.  If you lost the original doc, call the IRS and ask for another one.
5. Business or Occupational License.  This one drove me insane.  I started a software company so what the heck is a occupational license.  I thought this was for restaurants and hair salons.  Turns out you can get a occupational license in any state for any profession.  Typically it is associated with a location, but for a virtual company like mine, it is just a piece of paper.  To start the process of getting one go to your local township and ask them and then the county…  In my county they are now calling a business receipt.  Huh?
6. Copies of Drivers license
7. Personal statements that say you are who you are that are notarized.  You will have to do this.
8. Rent or lease statements if you lease.  This one drove me insane because if I had just said I run the business out of my house I would have been good.  However, I slipped and was honest and said I was going to share an office with a local CPA firm.  Basically I would be subletting, and I had not yet started.  Was this info I should not have offered?  Well I did.  This caused the loan process to back up 2 weeks as I had to get the CPA firm to write up a lease agreement…  What a pain.
9.  Signatures from Directors of Company.  Once again I was honest and told them about another officer of the company, which I did not have to do.  This caused me to have to duplicate all the documents I signed for the other officer.  The officer in my company by the way was not listed on the corporation papers.  No matter, once the bank found out, it had to be done.
10. Resumes
11. Signoff from the SBA.  Remember you will need the SBA to approve your application as well.
12. Explanation of Corporate Interests.  If you have founded other corporations, and they are no longer active.  Doesn’t matter.  In the state of florida they can look you up and they will all be available at http://www.sunbiz.org.  Now I know why people incorporate in Delaware and Nevada.  I hear those states don’t have an online Database you can quickly look somebody up on.  What this meant is explaining each and every business I am in or have been in.  If you have a dirty history, thank god not a problem for me, you may have an issue.  It still may not be an issue, but you will have to write a document telling them what the heck business you did back when and why and how, blah, blah, blah.  Did I give you the caveat that if you have dirty laundry.  They will find it.  I still have not regrets here, just another pain to write the letter to explain things.
13. More documents.  Only saying this because I am forgetting something.  There was always one more this and one more that.  This process made buying a house look easy, even under the current conditions of the mortgage industry.

Let’s face it, it took me 3 months to get them all the documents…  Once time I got close to finishing and they wanted one of the original documents again.  Huh?  And of course I could not find it, so I had to get my notarized document done twice.  Turns out the UPS stores do it but the Fedex stores do not notarize things.

All that said, we got down to the wire and 4 months from the date of first filling out the paper work, meeting with the SBA, lo and behold I finally got a settlement date, when the underwriters would approve and they would fund a bank account.  At the last moment, a lot of gotchas.  Turned out that I was off base on the loan, and I ended up with a variable rate.  I was happy to get the loan and did not complain.   Worse case scenario, if the rates go up, I will pay it off…  Also at the end they sent me a bill and told me that they would take $500 off the loan right at funding.  Did I know about this?  No.  Was there anything I could do about this?  No.  So the biggest caveat is, if you are business starting the business, and you are not OCD or anal retentive you are going to miss something and be surprised later on.  I am not OCD, I am your regular mortal guy, you may miss something like this in the documents they first send you.  You have to just be happy to get the funding and live with whatever small details you missed.  It is a price you pay.

One interesting thing I learned in this process is that there was no discrimination, no reverse discrimination or anything like that.  I remember going down the path of looking for an SBA loan like 10 years ago and there were problems with being a white adult male…  Back then if you were not a woman, a minority, Latino, American Indian, a senior, handicapped or a veteran you could just say bye bye to a loan.  All of these criteria seem to have been removed.  This is not the focus of the current SBA and I really think this is truer under the Obama administration than any other time.  And this is the right way to do this.  There should not be any criteria if you want to start a business, even if you are 15 years old…  It is an open system, which means those who need this loan should go and get it.

End of story, get the money if you need it.  Nothing is for free and you seem to pay a price for any loan you get.  It is a bit of mental anguish.  What I learned is it is probably just as much pain to get a loan for $2 million as it is for $25k, so next time I will try for a bigger loan if something like this will take that much time.  I could have easily taken the time that went into getting the $25k loan and consulted as a programmer.  In the 4 month period I could have made a part of that in cash with my blood, sweat and tears and not have to pay it back!

Another interesting thing I realized when they sent me a form asking me a simple question of how many employees part time or full time I hired is that I did have an impact on the economy.  My start-up business will use about 10 separate part time people over the next year as 1099s.  This means the loan is helping our economy and this is a very important part of the economic recovery!

Sounds simple…  Well, if you have read through some of my other blog posts about start-ups, there is a bit of a gotcha that a lot of entrepreneurs run into.  That gotcha, that wall, is common knowledge.  Sometimes common knowledge is not that common.  Because Zuckerberg did it with Facebook or Gates did it with Microsoft or your buddy down the street did it, doesn’t mean you can do it, at least the same way.  What worked for one person, may not work for another.  Get this in your head before making a business model decision!

Just when it seems like you know something, because you read something, does not mean you really understand the economics of why something is working or not working.

Ok, so you are thinking of starting a website…  Actually almost 1 in 10 people (especially young people) have the ultimate or their idea of a website that they would create and a start-up business.  I was walking through the mall the other day, stopped and chatted with a guy selling phones in one of those kiosks and he and I got to the point where he was telling he, his buddies are going to be creating a website startup.  Ah-ha.

Let’s start by looking at these models based on risk vs. reward.  Well, let’s start by identifying the business models (The ones I know of):

1. Advertising – You make money by visitors clicking on links.
No explanation needed. Google, Yahoo, lots out there, few successful.

2. Product/Service Sales – You sell products and deliver physically or virtually.
No explanation needed. Amazon, Best Buy, Target, Wal-Mart, abc distributing.

2. Membership – You make money (every month) by people joining your site.
You know, pay for monthly services to use,view your site.

3. Commission Exchange – You make money whenever a person trades, sells, works, with another person.  Ebay, LogoTournament, lots of others.

4. Sponsorship – Basically a twist on advertising, but more than advertising, you get paid no matter what the traffic, so non-click based advertising.

5. Virtual Business To Business Services – You sell backend services to other business. Good examples are Constant Contact, iContact, hosting, chat, etc…

6. Lead Generation
You collect the leads and sell them to a third party.  In fact, you control the information flow somehow and set the information price… Good examples are World Avenue, Autobytel, etc.

Risk vs. Reward

I am sure there are about 10 other business models out there (that are real clever), but this list is pretty much the ones that make sense on the web.  And when it comes to risk and reward you have to weigh the chances of your success versus the reward.  Remember, not everybody is going to make a billion dollars on their first venture.  I say be happy with a million.  In fact be happy with quarter of a million…  I say just be happy with success, meaning staying in business.

So, as you set out to create your new web business, even a new business model, you have to weigh your chances of survival.  How to you weigh your chances of survival:

1. Your Track Record
If this is your first time, then reduce the risk by succeeding in ways others are not…

2. Your Capitalization
Often website developing is not about revenue, but about staying in business.  Having the resources to do it, is critical.  By resources this is man-power really in the end.  Everything else, including hosting is dirt cheap now.

3. Your Talents
If you are not a programming, your chances of making a successful run at a web business model that is not retail are remote…unless you are fully capitalized.  Being a programmer you have an advantage, saving thousands on programming.

4. Your Ability To Schmooz
Getting others to work for nothing is a talent.  Getting partnerships in place to make it happen is a talent.  Having an ability to convince others to give you money is a raw talent.  A god given sales talent, but quite dangerous as well…  I will give some reasons why this is a negative as well in another post.

5. Your Tenaciousness
This may be a moot point if you don’t have any of the other things above.  Since if you are broke, not a programmer, not a great networker/presenter and haven’t done this before, your tenaciousness may seem more like agressiveness.  So back-off and make a small success first before lighting the world on fire.

The Personal Analysis

So, you need to look in the mirror and take your idea and go through an analysis.  Typically new, unique ideas start with the entrepreneur saying I am going to create this really cool site, like for instance a good example would be a local news blog site… And I am going to make money by advertising sales… Well, good luck.  In fact I tell entrepreneurs, the quickest way to fail is relying solely on advertising sales.  I believe that you will have to generate a million visitors a month to make something like $50,000 a year on the click through dollars… Remember most click-throughs are paying GOOGLE the money, not you.  You get a percentage of clicks, and you are not in control of the ad networks, Commision Junction, Google, Yahoo, AOL and others have a heavy hand in control already.  So get it out of your head that the ad model is your model!  Ad models on the other hand like Facebook and others are high reward if you make it big.  Chances of that happening are like 10 million to 1…

So, then you say, well my local blog can be a membership… Sounds good, and in fact if you can find a way to get people to pay, you are going to be in the money.  Not a lot of members per month paying to make a million dollar a year site in revenue.  I think if you had 10,000 members paying $9 a month you are a million revenue site.  So this is more of what you need to be thinking about.  I give you a 1 in a 1000 chance of surviving with a membership model…  If you do, you will profit nicely.

There there is the back-end model.  If you get it rolling, you will get hopefully month or period payments, so it is a very similar model to membership.  I will give you a 1 in 25 chance of survival in this model, because it is business to business and businesses need help online!

The exchange commission model is really dependent on your technical know-how and luck.  Choose the right model and you could hit it big like eBay.  My odds of success are 1 in 100,000.  So not so good, but who knows, it is a big payoff model like advertising, so you are either out of business or a billionaire.

Finally retail online model is a medium reward and lower risk.  You can make it well enough if you have the talent.  If you don’t and are new you still have a chance, but it is risky as well.  Knowing your product is everything and if you do know a product well, you may be in luck.  I think the prospects of becoming a billionaire are low, but my odds are about 1 in 10 will make some money.

Lead Generation if you pursue this money is about a 1 in 30 chance in my mind of making it.  It is possibly a good pay off as well.  Every store, sales rep in the world needs leads, so this is a great place to start as well.

Hopefully you get my point in this blog post about web business models and risk and reward.

Freedom Pays Less But You Are Happier

Well, lets start out by saying quite often freedom means no pay (at first).  I am noticing that while I am, of course, feeling the stress of getting my business off the ground,  I am generally less stressed than at a big corporate job.  Who knows why, but I am much happier in my own business.   I would often get all stressed out and unhappy about having to be at a meeting at 10:00 AM (a time most software developers abhor), to discuss very little with people you really don’t want to be in the room with.  In fact the lack of getting anything done was downright pissing me off in my corporate life.  It is a fact of life in corporate life.   Accomplishing something everyday is a happier way to go for me.  I will of course have to get back to big company life one day where we hang around the coffee room, but for now I have to get things done!

Freedom Is Not Really Freedom

Just a reminder point that freedom is not really freedom.  This counter point is just the reaffirmation that we all have to report to someone and a start-up person has to face the music, every day.

Indeed…Indeed

A small tinge of self-doubt is apparently always there in being an entrepreneur who was an ex-corporate person.  I was telling somebody recently that my hands start typing Indeed.com, when I start to feel the burn of not having revenue flowing in my business yet…  You can liken this to the experience of giving a major speech to a very large audience.  Everybody feels the nerves of a speech and everybody feels the pull of going back to a soft cushy company job.  But like a speech, you have to just make sure the audience doesn’t really know you are nervous, and like in “You Got To Be Believed To Be Heard” by Bart, you just have to make sure the audience does not know you are nervous.  Believability is everything.  You have to convince your mind you are on the right path, and quite often you are.

People Suck

Another reality check with start-ups is people. These people, who, if they took the time to read this blog post, are the people you do work with on a regular basis.  In a start-up you are constrained for time and money, and often because you don’t have the big money, you have to take what you can get in certain areas, and often these people lack the training that people have at big companies.  Not that they all suck, but you have to just accept the fact that they are not going to be perfect.  I am talking your partners, your employees, your customers, everybody sucks.  Sorry, but get over it and just let them do what they got to do (Even though you feel like doing it yourself…)

You Thought You Knew Something But You Didn’t

I love this article that came out in the late 90s about a Stanford class of young ladies who made thousands picking stocks…  Gailbraith was asked about this group and he basically said they were lucky.  Those  successful the first time and even sometimes both the first and second time often are unlucky the third time.  Luck still has something to do with success and nobody has a perfect record in the end (I know a few, and they were extremely lucky).  Have the attitude that you don’t know everything and do not get emotionally attached to your ideas!  Have the attitude that you can flex to survive or pull the plug and take a parachute out.  Don’t go down with the ship! If you see the hurricane ahead get out of the way.  You know what happened to the WindJammer Cruise Ship that defied common knowledge and attempted to sail through a hurricane from the Yucatan to Miami years ago.  The boat is gone without a trace along with the crew…

Mimicking Has Its Limits

There is this mimicking business theory I am understanding and adhering to more and more, especially after being introduced to the concept of your story by David Tyreman and World Famous “Branding Experts”.  You got to be yourself.  You have to develop your own brand and niche.  Every time some company makes it big, either Yahoo, Google, Twitter, Meetup, Facebook, Digg, etc, you see a sea of mimicking companies.  What else are thousands of programmers to do, but make a Twitter Copy… What they did not understand is copy-cats have their limitations.  If you are going to be the next Twitter, just quit now! You have to be your own company and your own thing.  Being the same as others  is not a winning strategy, with a few minor exceptions.  Those exceptions have to do with commodity markets, like 4 gas stations on a corner, where nobody can identify the brand…  Other than that, your web start-up needs to be unique and have its own story, or it will fail.  It may just fail as well if you are a niche and have your own story, so this can’t be guaranteed, but it is a start towards success.  Be yourself.

It’s The Asset Value, Stupid!

Online start-ups need to be accessed and valued for their asset value and not revenue.  This doesn’t mean I believe in advertising models…  I do however believe in the following as assets:

Monthly Unique Visitors
Number of Valid Email Addresses
Number of Online Members
Software Code
Patents, Trademarks, etc.
Resources Such As People (Networks, Contacts)
Building And Physical Stuff
Revenue & Net Income (of course)

In an online start-up it may never be about revenue or net income if your membership is enormous.  The valuation is all about critical mass.  It is counter-intuitive to old time accounting, but this is where the value is, at least in selling your business off.

Good Luck!

While those of us in our 40s and 50s or older freak out as we get let go from jobs with corporations that we have been with for 5, 10 or 15 years, there is another group of workers who are working through the night on their own businesses. 

This group is a variety of people.  They are 21 year college kids who see that this is by far the best time to ever start a business online, with unlimited access to millions on the web with just an idea and a keyboard.  Never has there been that much opportunity to do something different, get access to the world, use the tools that are out there, often free, and just do it.    These young people and others (not so sure if I am one of them) are regrouping themselves for a new career after figuring out there is none out there.  There are those who have been working the part-time thing on their own thing for quite a while are getting ready to launch.

Getting Ready To Launch

It seems like this new hard core group, and they may be 15, or 75, I might add, are gearing up for their big launch.  I am doing it too, as we get Take It National, Inc. ready for market.  This is the same conversation I have with Don from Austin, who is building a new kind of online business generator, or Jeromi from California, who has a new kind of dental floss, he is getting ready to launch. And then there is the lady we met who is starting a business of sending out young cute female models to boxing matches, wrestling, auto shows…

I guess if you don’t have the patience to go through the process of starting your own business and want a job, then follow some of these people around and when they grow their business big enough you will get a job from them, someday soon.

Where Do They Hang Out?

Now, not that I am a joiner, and even if I do join, it is only as an experiment typically for me, but my business partner and I have been hanging out at CEOSPACE.  Got nothing bad to say about them, especially now that I am a member.  They take in the wide-eyed, wondering if they can do it on their own crowd, entrepreneurs to be, and give them an street smart MBA like education in a weeks time.  I think from our recent experience, that CEOSPACE is for the serious entrepreneur with the serious idea…  My business partner has a similar type of training system for the every man called StartupBusinessBootCamp.com.  This one is for the masses and it can handle any idea.  Startup Business Boot Camp is running these weekend boot camp events around the country.  If you are in south florida I would check it out. 

Real MBAs

Finally there are those like myself, who suffer through the full MBA curriculum.  In fact, I did it twice, once at Farleigh Dickinson University in Madison, NJ, where I did not finish my MBA.   I finished my second at Florida Atlantic University in Boca Raton, FL in 2006.  Either way, this is a little more than a week, 2 weeks or a weekend.  It is a serious academic exercise whether you go to Harvard or FAU.   You do this for you mind and not for the paper, because the paper will do a little for you in a practical sense.  You still have to sell yourself to make it work for you.  In fact these other boot camp and CEOSPACE types of education I am finding more practical and more geared towards startups.  Sorry about that, but I am yet to find an MBA with entrepreneuralism that is honest and direct.  They are more like outings for professors.

Where Do The Hungry Hang Out?

Well, if you haven’t already put the words “Startup YOUR TOWN” or “Business Group YOUR TOWN” or “Entreprenurship YOUR TOWN” into google, you will find a mixed bag of groups in every town out there.  There is BarCamp, an Internet Social Media Startup Group, which is for the youngest and boldest of entrepreneurs starting out mixed in with bloggers.  BarCamp is in most big towns out there along with WordCamp (A WordPress Conference That Runs In Most Large Towns).  I would provide a link here, but BarCamp is always so disorganized an event, I can’t find one single national link…

There are also a dozen civic, technology, marketing, social media, internet or other related startup groups in every town.  Just look around and attend and maybe you can find some bliss.

What does “Reading The Startup Tea Leaves” Mean?

I have to say that there really is a pattern to startups in terms of success and/or failure and this is all in the data… You have to look through the real information, not the ones in your mind that can confuse you because you love an idea to death and are willing to go down with the ship on it, but rather the ideas that bring on real customers, real growth and real income. 

How Do We Get There?

So, like a person who can read tea leaves, you have to sift through your tests and find out if there really is a market for your product or service.  For a direct selling service like creating a gas station, there is no question of success, especially if there is a gas station across the street or 2 or 3 gas stations.  This is an early sign of success, even if you have not taken action.

Other Signs Of Possible Success

So our current startup comes from tests we were not even aware of.  In fact, until we had a company say to us, hey how are you doing this, taking your event businesses national?  We really did not know there was a product there. First they asked, and then we presented.  When we started presenting, we got lots of feedback about wanting our service in their backend.  So, from this we began the process of producing a product.  No hocus pocus or risk taking involved.  This was simply listening and sorting through the info and taking a risk.

Astrologers Are Not Right, Most Of The Time

So, how do you get it right?  It is not easy, because just one customer can say that there is a problem.  Is that enough to start a business?  Not really.  You need more customers, more analysis, more pro formas and a complete analysis of branding and the market to really understand the opportunity.  Finally you take a chance, but at this point you have done your homework, have a few potential customers and are ready to go.

Testing Is Everything

You can get lucky.  But you can also just work hard and learn.  No need to throw away everything with a potential loss. Early on test, test in ways you have not thought of.  Call customers, ask their opinion.  Seek more advice from them.  Get things started and get your product out there.  I have been through this a dozen times and have made my mistakes, but I think eventually I will get it right.

Since I wrote my last blog entry, Start-up Rules For Real People, I have had some meetings, some epiphanies, some conincidences that were quite ironic, that I have to write an addendum for those who read my first article about these start-up rules.  Basically almost every other day, somebody talks with me about an internet start-up idea.  Most are internal to my own start-ups and I can handle about 2 new start-up discussions a week.  This brings me to how many times I repeated myself in the past 2 weeks, going over these rules.

Business Love, Get Emotionally Detached Now!

For instance, the rule about not being emotionally attached to your web project.  I refer to this as “Love”.  Just like romantic love, people fall in love with an idea and can not emotionally detach from the idea.  One way of looking at this, is you have to separate the technology behind an internet startup and the business model. There has to be a firewall between these two areas of your business, or business plan.  Once you have lost your emotional attachment (often to a technology) and can look at the market clearly or with real evidence, you can make a decision on your business model.  Only a few brilliant (often 19-21 year olds) will get this right, right out the gate. 

Old Dogs Can Learn New Tricks Sometimes

Most of us are actually too familiar with old patterns of working.  This is kind of like the Can’t Teach An Old Dog New Tricks idea.  But it is actually the opposite.  You can teach an old dog new tricks, but that requires the old dog letting down their guard.  When I worked for abc distributing, before they sold off the farm, we used to refer this to the dr (MBA) asking the patient (exec) to take his shirt off for the examination, and he flatly would refuse, but yet would ask for a diagnosis… Huh. 

Finding The Hidden Trends

The concept of looking for new trends came up a few times, because that is where you recognize the opportunities in life.  You have to be a detective about finding new trends.  Looking at the front page of the new york times or wall street journal will give you clues, because honestly they are better at it, than your local palm beach post, but by the time it reaches the front of the paper, the trend is usually too late to join, but maybe not too late.  Trends have to be identified and measured for their location in the sequence of the trend.  A good example is the “Auction Mania” trend of 1999.  I remember it well, like it was Tulipmania.  The first couple of auction sites like Ebay hit it big and the trend was growing.  Suddenly there were a 100 want to be Ebay sites and 10,000 so called Ebay hanger-oners (none of them will own up to it now).  These hanger-oners are like band groupies.  They jump on the band wagon, often too late, and just flounder about telling you how they are making money off of it.  This was obviously satirized in the 40 year old virgin.  I will probably write a whole blog entry about just these trend manias and how to find them, join them and avoid them.  All depends on the timing of the trend.

This Time Is Different, Or Not!

I have had several conversations about the concept of time, time management, “what am I doing with my life”, commute time, time spent on high level things, low level things and everything in between.  It is important to “value your time”.  Hopefully the people I mentioned this to, understand it.  Well, don’t really think anybody misunderstands this.  Somehow they just ignor it, and go about their lives, throwing hours under the bus, when they could better use it.  Not to say that I am saying what is a better use of our time, but our ability to get things done and efficiency depends on the better use.  So, when I was stuck at jobs where there was literally nothing to do over the years, I had something always, always learning, getting my MBA, my certificate, my knowledge, my score, and always being the life time learner.  So it is not a bad idea to keep a good read on your desk for this reason.

Anyway, those are my comments since writing the first group of rules.  If you want to read them again, go to New Start-up Rules For Real People here.

This is not a comprehensive list, nor will you have to get your pen out.  These are just the rules that I have noticed.

Now, first off, I am not the start-up guy from the ground up historically, meaning, I have worked in the corporate environment, worked the day and night job, sold off a start-up and/or some software over the years, gotten an MBA as well, and still go back to start-ups for more pain (or gain).  This is a work in progress, so I am going to add to this blog entry as I see fit.  It is just an opinion, and I probably will borrow a few points (especially from Guy Kawasaki), so sorry about some of the plagiarism.

Rule 1
Less Can Be More, And More Can Be Less

One of my old MBA professors used to have a quiz about entrepreneurs.   It was a multiple choice question.  Is the Entrepreneur’s motivation best described by 1. Wanting To Be Rich, 2. Independent of Others  3. Brilliant And Be Recognized or 4. Lazy.  Now take a moment to think about this question, because I have yet to have a person answer this correctly, especially if they have not been in the trenches of a start-up.  This first off, is a subjective question, and I got it wrong.  My old MBA professor surprised us by saying lazy.  Why lazy?  Because the first thing an Entrepreneur needs in his arsenal to be successful, is the desire to get others to do the things that he can’t, leveraging the world of skills around them, so they can lay back and think at a higher level or go golfing.  Every Entrepreneur dreams of the day they will be on their boat or taking time off, because the trenches may be fun in the beginning, but eventually it wears away at you, especially if you don’t have the freedoms of 9-5 guys.  Hence, why I spent many years in corporate America.  Quite frankly its easier.

The whole concept of doing more with less is what you have to get used to as an Entrepreneur, as you have to figure out a maze of choices and decisions.

Rule 2
Value Your Time

A few years ago, I was considering start-ups as I drove to work in New Jersey.  It never happened there.  Why?  Because back then I did not value my time.  And in New Jersey, there is little time for a start-up if you want to survive financially.  You need to put a price on your time, where ever you use it.  You don’t need to think about it all the time, but you have to have a price per hour.  Whether it is $25, $50, $100, or $500 an hour, it is worth something.  So, when you take a full-time job with a 60 mile commute each way, you have to add up the hours.  If it takes 3 hours to commute each day, and you are worth $150 an hour (consulting), you have just blown $450 every day of time you could be using for a start-up, walking the dog, playing with your kids, etc.  Take that money back and give yourself a chance by taking a job with less pay that is closer to home.   Also, I know a certain entrepreneur that goes to work 20 hours a day on his new venture, bulldozing his way towards success.   Trust me, this technique may sound smart, but smart is sitting back and making sure you are putting your time towards the tasks that are at your value level, and moving all the tasks smartly to others…

Rule 3
Separate From Your Emotional Brain

This one took me a long time to communicate, but a long time to have the guts to discuss this with people.  It is bottom line thinking.  I am not traditionally a bottom line guy, but you have to get to it quickly in your start-up, otherwise you will find yourself on the wrong path.  You have to separate your emotional involvement with the product or service.  This is not easy to do.  Entrepreneurs are passionate, but that does not mean the business model will work.  I have seen about 50% of start-ups fail simply because they have not thought out the business model, which could mean they are in love with their idea.  You know what it is like when you are in love,  you just can’t get it out of your mind.  The idea bugs you night and day.  But trust me, a little voice of reason should be applied.  Now I have failed, trust me miserably, in getting others to separate from their emotional brain and look at things objectively.   For instance, you go into a business because you think, without any serious research or confirmation by others, that the business will make money.  Or you go into a business helping people, and somehow you will make money.   For some reason I have seen this repeating pattern over the years and could not steer these people clear of this pitfall.  I will give you a clue.  If you are creating a non-profit related business, it is unlikely you will find a profitable model, and therefor your chances of financial success are diminished.  Financial success is still the most important end result.  Trust me on that.

Rule 4
Find Ideas In Everyday Things

You think a great idea has to be sophisticated.  Not really.  The only time I needed to find a sophisticated concept, is when I wanted to win a business plan contest, but that was not about reality…  You just need to look around and find something that solves a problem.  It could be a simple product or a simple service.  I am a web developer, so the web is big time for me.  Online you have no limits, complete unlimited freedom to solve some small problem with a small idea and put it into action.   And most of these successful start-ups solved the most mundane thing, not the most complicated.  Like for instance I remember a start-up Yoga accessories website, I wondered if they were onto something, and they were.  And I also visited a guy in south florida who was running an iPod accessories business out of his garage in the early days of the iPod around 2000, and he has been successful ever since.  I believe his company is called ExtremeMac.  Just look around and find the simple things to solve, not reinvent the world or have it so complicated the customers can’t understand what you do.

Rule 5
Discover Hidden Trends, Not Ones On The Front Page

I am always looking for a trend, and when I see a new one, that has not been discovered yet (by the masses of asses), I know that is something important.  For instance, recently I have seen a possible new trend of online services that serve us in a way we have not yet been served before, way beyond personalization.  I call it Super-Customization.  It is the concept of applying a concierge service to anything online and going way beyond the competitors to serve a niche of customers who want to either pay more or experience things at a higher level.  Now what is the problem with trends on the front page of the New York Times… The problem is that this is typically when the trend is oversold.  I have seen it happen with a dozen trends from creating a search engine, Websites in a box,  Online Dating Sites, Speed Dating, Ebay mania, Social Networking Sites, personalization, RSS, iPhone development and others.  If you are jumping on the train speeding by with a trend already in motion, you probably will end up on the tracks with the train speeding by crushing you to death.  You need to find a niche, you believe will survive or prosper and keep your head down and not get caught up in the lack of reality train.

Rule 6
Use Technology Effectively

A lot of people jump into an online venture and find out after spending a lot of time, money and energy that they are not using technology the way it should be used.  The opportunities to use the internet for video phone (Skype), for project management, for sophisticated email services and a host of other technologies are what will make or break your business these days.  Effective use of Search Engine Optimization and having a website that gets found is a good example.  This is a bit tricky, because if you are a novice, it is possible that you will flounder here.  Find a local expert who can give you assistance in this area.

Rule 7
Family And Friends Does Not Mean Family And Friends

I picked this one up recently from Jack Karabees.  Basically don’t expect your family and friends to be your investors.  When they say family and friends they are not talking literally.  These family and friends should be more of acquaintances, or you will find yourself in hot water with your mother, brother, friend.

Rule 8
More Education Is Always More Important

On Yahoo business a few years ago a woman wrote an article about why you don’t need an MBA.  On the most part, she was right.  I have one and it is no panacea for the business world, especially when starting up a business.  But I found her article completely misguided.  You don’t need an MBA, but trust me on this, every start-up person would love to have one.  More education is always more important.  I wish I had a PHD.  The more info in your brain, the more you have to draw from in starting a business.  Now there is a down side, in that the typically over educated person may apply things to business that are not practical.  This comes from their institutional experience,  not from the degree.  You can always use more education and do not toss this aside lightly.  More education is always better.  Don’t toss it aside unless you are in the middle of a start-up.  Got time off between start-ups.  Go back and get a degree…  Even after finishing my MBA, I went on to get a certificate from the CED, the Center for Entrepreneurial Development about tech start-ups.  It was worth it!

Rule 9
Learn Timeless Things, Not Trendy Stuff

This is a bit of a non-sequiter, but this is important to understand as you grow as an entrepreneur.  There are certain things in life that are useful over and over again, and then there are things that are gone in a blink of eye.  As we learn things, try to find the things that are consistently the same over time or over time periods.  For instance, Excel has been the same for 20 years for me, as has Linux.  If I had learned Lotus and early Windows versions only, or just DOS, I would have lost my knowledge. Learning a P&L, Cashflow and Balance Sheet is timeless…  Learn the things that you can use again and again and discard things that are just for the moment…  Sometimes we have to learn technology that is fleeting, but find the consistent stuff and you will succeed more often.

Rule 10
Know When To Get Out

I would have never believed the story of the Genie and 3 Wishes would be a general truth, like a Twilight Zone Episode, where the guy wishes for something and gets what they deserve in the end.  And once again this is something I have seen and will continue to see over and over.  You just have to go through this one time in your life to learn this lesson, hopefully.  I have seen it a dozen times over the years.  A person builds up a modest business and has an opportunity to exit, relatively early, but does not take it, because they believe they can and will do better.  It is a gamble like everything in life.  A good example is of a this, is a small ISP I was writing business plans for in 1999.  The owner came to me and told me a man showed up with an open offer to buy the company.  An open offer means that they wanted you to put a price on a contract and sign it…  Crazy now that I think about it.  But things were crazy in 1999 with the Internet.  This was a million dollar a  year revenue business, an ISP, and the owner felt it was too early to exit.  I wish I knew then what I know now.  The trust about life, is things will and do change, like, the economy, our health, 911, wars, volcanoes, meteors, presidents, who knows.  Life just throws a curve ball at us when we least expect it.  So, when we got a chance to sell my first start-up in 2004 for a little less, we took the money and were happy for it.  Every time I hear an entrepreneur tell me that they are going to hold out, I cringe.  If you are successful enough to get an offer, 90% of the time, the first offer is the best…