Up and Running:

I received an email over the weekend from a reader of my 3 Weeks to Startup book, asking me this:

I have recently secured a business name (I’m not including the real name. Call it ACME). I’ve done some research and it looks like it has not been taken in my hometown. However, it is being used in a neighboring state, and I did read that each state has different laws. Can I be “ACME” in my home state where it has not been used, and changed to “ACME of Florida” where it has been used already?

My answer: That’s a really bad idea. If you grow, or want to grow, with that name that somebody in the neighboring state already has, that company can stunt your growth completely by objecting to the confusion. And if the other business had it first, you’re out of luck.

Don’t be fooled by being able to legally register a name in one place or another. That doesn’t mean you won’t get in trouble later on. Legally there could be an ACME corporation in every state in the union, but as soon as one of them starts to bump into the other in the same type of business, then the second business in the market or state loses.

Important note: I am not an attorney. This is not legal advice. When in doubt, see an attorney.

For additional information, you might try this article at bplans.com and particularly this name game disaster story from a couple of months ago on this same blog.

(Photo credit: By Rob Byron via Shutterstock.com)

Many years ago I was leaving a job as a vice president at a market-research firm to go out on my own when several of the other four vice presidents at the firm suggested I was crazy to do that. Their worry was security, family and so on. My wife and I had four small kids at the time.

I left anyhow, and I didn’t feel any more at risk on my own than I was with the salary. “You’re only as safe as your billings in this small firm anyhow,” I told them. That turned out to be ominously true. They were out of their jobs within the next two years. All four of them.

I was reminded of this by Steve King’s post Do Small Business Owners Have More Job Security and Personal Time? on Small Business Labs last week. Steve gives us research from Ace Hardware that seems to say this (his words):

So small business owners feel their jobs are more secure and they have more flexibility, independence and personal time. Sounds pretty good–if you make it.

Interesting for entrepreneurs. But remember, with all research like this, consider it food for thought, and stay skeptical.

Remember the (stupid) “out of the box” cliché?  Yeah, I hate it, too . . . but a lot of entrepreneurial opportunities involve fixing broken things. Disruptions under way, and disruptions needed. I’m just thinkin’.

1. Disruption there, waiting for you: YouTube is free, powerful and extremely easy to embed in a website, and almost universal. Can Google support it forever? Can it support itself? Are you working with it yet? Will your competitors work with it?
2. Disruption needed: Textbooks are too expensive. When setting up my start-your-business course, just as an example, my students can get Guy Kawasaki’s The Art of the Start for $18. Most textbooks on entrepreneurship sell for about $120.
3. Disruption disorganized, struggling to be born: something to bring entrepreneurs and investors together that isn’t illegal, isn’t haphazard and works. I’ve posted on this before. Angelsoft.net and thefunded.com are on the way. But seriously, investment falls, recession . . . isn’t it time for something new?
4. Disruption and now what? Doing the hard work in journalism, like investigative reporting, digging and getting paid for it. How’s that going to work in the future? Related note: the Huffington Post has full-time journalists on staff now; is that the news media of the future? (and disclosure: I’m biased; I post (proudly) on Huffpo).
5. Disruption needed: all those good blogs nobody notices. Finding needles in a mountain of needles. The scarce resource is not finding, but sorting through.

You don’t have to do a formal business plan to get the benefit of business planning. Why not start the planning process today; or, if you’ve done a plan in the past, reinvigorate the planning process. Real planning is modular, and iterative, not step by step. Here are some things you could do today.

• Set a review schedule now. When are you going to double back and look at results? Put a date on it.
• Develop assumptions. List them. 
• Review or develop your strategy, the heart of any plan. How are you different, what are you better at? Who are you selling to, and who isn’t your market? What are you not doing, and why is that important?
• Review or develop milestones: dates, deadlines, activities, budgets, and who’s responsible.
• Develop your basic numbers, and write them down: sales forecast, expense budgets.

And don’t feel compelled to do all of these today if you can’t. Do just one. Pick a card. Start anywhere, and get going. One step at a time; and you choose which step.

So, I do follow my own advice. Yesterday I posted here about how putting video on your site is relatively easy. So today I’m posting this video here. I did it last weekend. I confess; I was motivated in part by wanting to do something with my new FlipHD video camera.

The river seems to drown more people in the slow deep inviting part than in the crashing and splashing white water part. Similarly, unexpected Cash flow problems are more likely to catch the growing company that’s enjoying sudden growth than the declining company that knows it’s in trouble.

Here’s my video explanation of that, as posted on YouTube on Sunday. By the way, you can click here to go to the YouTube original, which includes an HD option.

The good news here is that this post–the actual title is 7 Steps to Creating a Winning Coaching, Consulting or Service Business–is done by a true master in the field, John Jantsch, author of Duct Tape Marketing. And he’s not recommending anything that he hasn’t actually done himself.

However, that’s also the bad news. John makes it seem easy with his step-by-step guide, but then he’s not just a master of this, he also started early in the blog world, he’s really smart and he really works hard, too. For every successful expert blogger, author and coach like John, there are about 10,000 other people trying to do it, but not getting there yet.

John’s seven suggested steps (very abbreviated here, by the way . . . John offers much more detail on his post):

1. Turn your service into a product. Selling services is a little like selling air.

2. Develop a suite of tools and systems. Making it up over and over again with each engagement, writing proposals and reacting to client demands is a very tiring business. When you can guide a client logically through the path to success with a professional process, your business will become more profitable with each new engagement.

3. Build a brand that’s easy to talk about. It’s crucial that you can tell a story worth repeating and make that a foundational marketing element.

4. Push out lots of expert content.

5. Lead generate from multiple outposts. To build a winning practice, you need to generate awareness and trust by appearing everywhere. This means speaking, writing, advertising, PR and referral generation.

6. Perfect your lead conversion close. I’ve found that writing proposals and reacting to what a client thinks they need can drive you nuts. When you take the tangible product approach married with the expert content approach, lead generation is more about getting in front of the right prospects and explaining “this is how we do it” in a way that addresses what you know they need.

7. Construct a killer network. A strong network is also a powerful business tool for the solo entrepreneur to use as a sounding board, sanity check and social outlet to replace the interaction that often comes with working with an internal team.

Going back to the bad news, as I read this, I’m very much afraid that John has skipped the first step: Know what you’re talking about. Get your credentials. Be a real expert. Without that, John’s recipe won’t work.

And perhaps I’ll finish by rocking back over to the good news side: If you do have that kind of expertise, John has packaged his steps exactly as he recommends you do, and you can buy that from him at Duct Tape Marketing to make it much easier to implement. And John isn’t the only one; several others are doing the same thing. For example, Pamela Slim, with her Escape From Cubicle Nation book and workshops, is also sharing huge volumes of good advice on how to do it.

That is, if you have expertise to share.

Stock options can be wondrous things. They can also be smoke and mirrors, or a pea under a whole bunch of walnut shells. So here are some points to keep in mind, whether you’re the founder offering options to your startup employees, or the employee being offered the options.

1. The classic stock option is an option to buy a share of stock at a specified price. Say you get to buy some number of shares for a penny each. If those shares are worth (meaning they can be sold legally for) more than that penny, you make money. In theory.
2. Understand the basic numbers on shares in a company: charters specify how many shares there are, and if you know that number then you can guess what a share is really worth by dividing what the company might be worth by the number of shares outstanding. So if that option to buy a thousand shares for a penny each is for a company that has 10,000 shares outstanding, it means you can buy 10 percent of the company for $10. Pretty cool, if the company is worth more than $100. But if there are 10 million shares outstanding, then even if the company is worth $10 million, your options are still only worth about $990. That’s hardly a great bonus. Notice how important the number of shares outstanding is: knowing that it’s 1,000 shares does you no good until you know how many shares exist (which means they’ve been issued, or promised). Quick quiz: Which is better–options on 1,000 shares in a company worth $50 million with 10,000 shares outstanding, at $1 each, or options on 10 million shares at one penny each, in a company worth $200,000 that has 200 million shares outstanding? (The first case is worth $4,999,000, and the second is negative, because each share is worth only one tenth of a penny, and you have to buy it for a penny.)
3. None of this matters until a company is actually traded. Call that a liquidity event, and investors call that the exit. That’s when those shares suddenly mean money. It used to be that successful startups would “go public,” meaning they’d register their stock on one of the major markets, following carefully regulated procedures, and then it became legal for normal people to buy and sell the shares. That’s also called the IPO, or initial public offering. Until then, only “accredited investors” could buy them. Meaning that it was pretty hard to sell them; usually impossible.
4. Shares can also be worth money when a big company buys a startup. If the buyer pays cash, then people with options get to cash in as long as their option price is lower than the per share price of the acquisition. These days IPOs are extremely rare, so exits are usually by acquisition.
5. There are a lot of legal restrictions. Stock options have been abused for years. For example, they’ve been used by companies to pay people in a way that ends up getting taxed as capital gains, instead of regular income–a much lower rate. So the government watches them very carefully. Issuing stock options takes some legal work.
6. People get fooled by stock options. I know someone who left one company to go work for another because the second one gave lots of stock options. It felt like a lot of ownership, but there was no chance the second company was ever going to succeed and achieve an exit. So options can end up being like shiny things to lure people, with very little value.
7. When you get offered stock options in a startup, you have some tax choices to make. If you buy the options quickly, then you’ll hold them longer and pay long-term capital gains taxes (which are lower) when you cash in. On the other hand, if you don’t buy them, and the company never gets to an exit, then you’ve saved yourself money.
8. Your share percentage can change. You might have options for 100,000 shares in a company that has 10 million shares outstanding. That’s a 1 percent ownership. But sometimes that same company can issue new shares and bring in new investors in a way that dilutes your option shares. So they decide to get investors in by giving them 10 million shares and they just issue those shares. Your 1 percent just became half a percent. Depending on terms of the options, rights, and legal maneuvers, that may or may not be legal (caveat: I’m not an attorney; I’m sharing my experience in the field, not legal advice.)
9. Companies that give away options too easily can hurt their capital structure. If a lot of consultants and advisers and accountants and lawyers are getting compensated for their professional work with stock options, then investors are less likely to value the stock. A lot of startup business plans try to define how much stock ends up in the hands of founders, employees and investors. Things change, of course, but it’s a good idea to have some sense of proportion.
10. The best use of stock options in a startup mode is as a message. The people who get the options should realize that these are very long odds, but there is a message, from founders to employees: “Work with us, stick with us, and if we make it big you’ll make money, too. ” That’s a nice message to send.

Here’s an interesting tidbit in business history: when Apple Computer went public in 1980, it generated more millionaires (about 300) than any other company in history. That included some people who were very low on the pay scale but had been given options early.

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And a late addition, a week later: Oh no, I forgot to discuss vesting. Stock options are normally vested over a period of time, rather than given all at once. Options are not really yours until they are vested.

For example, options might be vested over two years. Depending on the fine print, that could mean either that you get them all at the end of two years if you manage to stay with the company; or that they are vested according to some schedule, like half after the first year and the rest after the second, or 1/24 of them every month for 24 months. Vesting makes a big difference.

This piece called 8 Franchise Ownership Myths got my attention the other day. I like myth busters. This one, however, surprised me; some of those myths seem like they are really true. For example:

Myth 2: I can only be successful in a business I love.

Makes sense to me, so I guess I buy the myth. But Terry Powell says:

Believe it or not, businesses based on an owner’s background have the highest failure rate. Your franchise business is a vehicle to the lifestyle you’re seeking. If you limit your choices to what you’re familiar with or good at, you’re placing yourself at a major disadvantage by ignoring a huge number of possibilities that are outside your realm of past business experience.

Then there’s this one:

Myth 4: I can’t be in a business I know nothing about.

Which also seems to me like it would be true, but Powell says this one is a myth because. . .

Of course you can. It’s natural to want to stay in your comfort zone and stick to areas you have experience in. But as a franchise owner, your job is running and growing your business, no matter what it is. Remember, you have transferable skills.

Maybe. Do most people getting into franchises come out of management somewhere? Do they have business experience? I don’t know, but I do wonder. Aside from studying McDonald’s for a couple of years while consulting for Apple Computer, teaching at McDonald’s Hamburger University once or twice and doing a custom business plan software job for McDonald’s, I haven’t had a lot of experience with franchises. And even that was more than 12 years ago, all of it.

So I asked my friend Joel Libava. He’s on Twitter as @franchiseking and his blog The Franchise King is on lots of lists of better business blogs. He’s also a fellow contributor to Small Business Trends and some other blogs. It turns out that Joel had trouble with some of those myths, too.

On his Myth 6, “Franchises stifle creativity,” Powell says, “The only limitations you have are those that have already been proved to generate income.” Joel says:

That is untrue. Folks, you still must do things their way–not your way. Just because a couple of McDonald’s popular sandwiches were suggested by some franchisees, please don’t go into a franchise thinking you are going to be able to do that. You won’t have time to think of wonderful new ideas. You will be running your business. From their blueprint.

On Myth 7, “I can’t afford a franchise,” Powell says: “Sure you can, if you look at it for what it is: an investment in your future.” But Joel points out that Powell sells a franchise:

Interestingly enough, Terry’s own franchise offering comes in at–you guessed it, under $100,000. Most franchises that have a total investment of under $100,000 will involve heavy sales and marketing. Most folks are not that sales-oriented. If you don’t have a dynamic sales personality and superb sales skills, be careful of the lower investment opportunities. If they don’t require a physical location, that means that the customers won’t be coming in to see you. You’ll be going out and finding them.

On Myth 8, “I’ll have to quit my job to become a franchisee,” Powell says: “Many franchise concepts are specifically designed for people who are working other jobs.” Joel doubts it:

“What? Only a handful of franchise opportunities are designed for people that are keeping their jobs. They require deep pockets and are usually multi-unit franchises that take a lot of time to grow and make money at. But they can be great opportunities for some.”

So there. Different points of view, always interesting. Whom do you believe?

Yes, I’m biased, but still, this is a good list of tips from Sabrina Parsons on the She Takes on the World blog.

1. People are the most important asset in your business. People are also much harder to manage than products or services. As an entrepreneur, you may have heard this from other people: Hire slowly, but fire quickly. This is a very true statement. People will make or break your business, so get the best and don’t settle for less.
2. Set the culture for your company early on. Think about the “culture” you want to maintain and what it takes to do that. For me and Palo Alto Software, being a company of entrepreneurial-minded employees with a very family-friendly attitude is what works. I could never get upset at an employee who puts his/her family first, because that is what I do. People know that; the people who work here love it and appreciate it. Many people say this is the best place they have ever worked. In my opinion, that is not necessarily because it is the best place to work–it is because it is the best place to work for the people who work here. They are a cultural fit with our philosophy.
3. Planning is an ongoing process that helps manage the business. Your plans will not always be right, but they will help you understand where you want to go, how you will get there and what to do when obstacles get in the way.
4. There is more to life than business. Business will be here today and tomorrow and the next day. A healthy approach to running your business includes time off to focus on things that make you personally fulfilled, whether they are family, kids, hobbies, etc.
5. You will never be able to do it all. There is no such thing as “super mom.” Compromises will have to be made. Be honest about the compromises and compromise where you can without losing the morals and values that make you who you are.

Sabrina is CEO of Palo Alto Software. She blogs at MommyCEO.wordpress.com. Why mommyceo, you ask? You probably get that from the picture, which was featured in a profile on USA Today. She’s expecting her third child.

I just read How To Set Up A Google Store In Minutes by Lisa Barone on Small Business Trends. Lisa lays it out in very simple steps.

Last week, Google released yet another gadget that may win them friends with small-business owners. It’s called the Google Checkout store gadget and it essentially allows you to use Google Checkout and Google Docs to to easily create your own online store in a matter of minutes. What makes the gadget especially interesting is that because it’s tied to a Google Docs spreadsheet, small-business owners can keep product inventory without having to use another third-party program like QuickBooks. Something many of us can probably appreciate.

I’m not a store user myself anymore, but I went through this hassle early on in my Web days, working with an Amazon.com store first. Our company grew beyond that and we ended up with a much larger system, but it involved a lot of programming by one hard charger in the beginning and a team of four within a year. Happily, we had revenue to match, so it all worked out.

Since then I’ve often recommended the simple turnkey store option to early-stage entrepreneurs and solopreneurs. Without it, the hassles are enormous. Yahoo! had a good option even 10 years ago, Amazon.com does, I’m told eBay does (but I hear different things on this one) and Lisa Barone’s post makes the Google store option look very good, too.

The simple store option let’s you start selling quickly. Link the store into a simple site and see whether people will buy what you’re selling. And if people do buy, then a store is the best possible market validation.

Lisa lays out the steps very well, and also comments on some tradeoffs:

I don’t think you can call the new Google gadget a PayPal killer any time soon, but if you’re looking to get an online store up and running quickly, this may be a good way for you to go. The gadget does what Google does best–simplifies Web activities so that even us regular people can take advantage of them.

Do practice some caution, though. The gadget is still in beta so we don’t fully know what Google plans to do with it. You don’t want to launch a huge online store, only to have Google decide to take it down or make adjustments to it without telling you. Still, I think it’s worth experimenting with, especially if you’re simply looking for a quick way to get started in the world of e-commerce.

Well written, and very useful.

Cornell University is celebrating a new online product design and development certificate program with an inauguration event contest on this blog awarding the best story about “your biggest challenge when launching a new product or service.” The winner and, for that matter, any other good entries, will appear on this blog as long as it or they are good reads (and I will edit). And the winner will also appear at the www.ecornell.com website.

Contest rules: Tell your story. Send it to me using this form on my timberry.com site. Aim for no more than 300 words (”aim for” means don’t sweat it if you have 325, OK?), give me some web addresses so I can see for myself (if possible). Do it within the next week (from the day this appeared: August 3, 2009).

Nothing confidential: Remember, please, that I’m a blogger. If you don’t want your story posted where anybody can see it, then don’t send it.

Why enter? Just for entering you get $100 off of $3,000+ tuition for this certificate program. The winner gets 10 percent off tuition. Tuition is either $3,750 or $3,375 for early enrollment. I choose the winner.

What do I get out of it? Stories to tell. Nothing more. Organizers asked me to use my blog to do this, and I said yes. There’s no money involved.

Legal stuff: This isn’t a drawing or a lottery. Entry is free. You don’t have to buy anything. The prize is a 10 percent discount off of the certificate program’s $3,750 (or $3,375 if you enroll early) tuition to the winner. And Cornell offers a $100 discount off of that tuition to everybody who enters, just for entering.

The program itself, brainchild of Cornell’s systems engineering professor Peter Jackson,

“. . . takes entrepreneurs through an eight-step methodology and structured process for taking an idea or product to the point where it can be handed off for completion.”

That’s from the Cornell press release about the new program. A “certificate program” means what it sounds like. If you take this course and complete it, you earn a certificate from Cornell saying you did. That’s not a bad thing. Education is nice, and certification makes it even nicer. You can go to this page for enrollment and more detailed information.

And while I may be partial to the schools I have degrees from, this is Cornell. That’s a great logo to have on your office wall.

Can you take the risk of starting a business? I think most of the focus in starting a business is about the specific risk in the business, but Eric Williams notes a problem with what he calls general entrepreneurial risk on the Oregon Business Broker’s Info for Business Buyers.

Writing specifically about business buyers (as opposed to business starters, generally a different group), he says:

I find that some prospective buyers obsess about and over-analyze General Entrepreneurial Risk, rather than Specific Business Risk.

What’s the difference?

• Employee turnover is general risk, but dependence on two very important employees is specific risk.
• Losing clients is general risk, but a business that depends on one client for most of its business has specific risk.

What I realized, reading Eric’s post, is that I normally look at a business plan with an eye on the specific risk. But in starting of a business, buying a business, or running a business, you also have to acknowledge the general risk out there. Including the rest of Eric’s list:

• uneven cash flow
• a declining economy
• an important vendor going under and
• many others.

If you’re going to start or grow a business, you live with a lot of risk. And remember, by the way, that risk goes both ways: There’s a lot more upside to owning your own rather than just being an employee, but more downside, too.