Tag Archives: Guide to the Startup Phase

The Entrepreneurial Advisory Council

The Entrepreneurial Advisory Council

The Entrepreneurial Advisory Council hosted its first workshop.

The event titled, “Making Your Startup Investor Friendly” took place on Wednesday, October 8th 2014 in San Diego, CA.

The Entrepreneurial Advisory Council is a group of professionals that serve San Diego’s growing number of innovators, entrepreneurs, and startup businesses.

The council’s expertise includes legal, financial, capital formation, and business planning services. The common thread among all members of the Entrepreneurial Advisory Council is their commitment to building meaningful connections that lead to successful business ventures.

Michael Acheatel, the President of The Startup Garage, is one of the Council’s co-founders and was a speaker at the event. His presentation focused on the milestones that investors care about at each stage of the funding and milestone timeline. He took the audience through the 7 major categories of startup milestones – business planning, team building, market traction, legal, operations, product development, and founder leadership – and highlighted how these milestones evolve throughout each round of funding. He specifically focused on the early stages of funding from friends, family, and founders as well as angel investors.

Michael was followed by his fellow co-founders of the Entrepreneurial Advisory Council – Hass Sadegi, Rob Domingue, and Joseph Erle. Hass is the Principal Owner of Sadeghi Legal and offered his advice on how and where to legally structure your startup as well as how to avoid exorbitant lawyer fees down the road based on appropriate planning in the early stages.

Joe is an insurance broker with 5th Ave Insurance and spoke about the types of insurance that investors require and how to reduce risk for the company.

Rob is the Director of Transcend Valuation and spoke about valuation and how to both create and determine value in a company.

Lastly, the panel opened up to a Q&A session where they received several excellent questions from the audience.

With good food, a great audience, and 4 experts with unique insights on what investors like to see in a startup, the event was deemed a complete success.

The Entrepreneurial Advisory Council will host a workshops once every quarter in San Diego.

Whether you have a question about your Startup or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

How to Make Family, Friends, & Founders (FFF) Investment Legit?

Friends Family and Founders Invesstment from The Startup Garage

How to Make Family, Friends, & Founders (FFF) Investment Legit?

Welcome to video Fridays from The Start Up Garage


A place where The Startup Garage’s team, answers questions directly from viewers

Key Take Aways From Video:


1) The first thing you want to make sure of is that your startup is incorporated

2) The second thing you’ll want to consider is whether you’ll offer
debt or equity

3) One of the commons documents that a lot of states will require is called a PPM

4) Get your paperwork in place or it will come back to haunt you.

 

Complete Transcript Below:

Question= I need to have in place to make my family’s investment in my startup legit?

Well Michelle this is definitely a common question that we get all the time, and some people avoid doing the proper paperwork, and it usually comes back to haunt them in the startup process, so I highly recommend you get the proper paperwork in place. The first thing you want to make sure of is that your startup is incorporated.

There’s a number of different types of corporations: SC, LLC, and you’re going to want to talk to an attorney about that to determine what type of corporation you want to set up.

The second thing you’ll want to consider is whether you’ll offer debt or equity. If it’s a debt investment then you’ll want to set up a promissory note or a convertible note, and your attorney will also be able to get those documents for you.

If it’s an equity investment, meaning you’re going to give them shares in your company, then that varies state by state. It also has a number of different variables that will depend on what the requirements are that will make that a legitimate investment.

One of the commons documents that a lot of states will require is called a PPM. So those are just some of the basic outlines of what you’re going to want to put in place, before you get your family investment.

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

How Long Does It Take to Raise Capital?

How Long Does It Take to Raise Capital? from The Startup Garage

How Long Does It Take to Raise Capital?

Welcome to video Fridays
from The Start Up Garage

A place where Tyler Jensen, The Startup Garage’s founder, answers questions directly from viewers

Key Take Aways From Video:

1) The average time is somewhere between three to six months for both you Angel round and your Series A round.

2) It really breaks down into three major steps. There’s preparation is step one. Pitching and due diligence is step two. Negotiating and closing the deal is step 3.

3) Preparation, this can take anywhere from one to three months on average

4)Pitch your potential investment opportunity to them. If they’re interested they’ll move into due diligence, which means they want to find out a lot more information out about you and your business. This step two can take 1-3 months as well.

5) Negotiation and closing the deal. Getting all the terms down that you and the investor will agree upon into some legal documentation. This can be done anywhere from one week to one month.

Complete Transcript below:

Question= “How long does it take to raise capital?”

Tyler Jensen: That’s a great question, one that I get all the time. The answer is that it varies. The average time is somewhere between three to six months for both you Angel round and your Series A round. It really breaks down into three major steps. There’s preparation is step one. Pitching and due diligence is step two. Negotiating and closing the deal is step 3.

In step one preparation, this can take anywhere from one to three months on average. This is where you put together your business plan, your pitch deck, your capital strategy, and achieve any business milestones that investors are going to want to see before you raise capital.

Once that is all done you go into pitching and due diligence. This is where you identify the potential investors, contact them, and then pitch your potential investment opportunity to them. If they’re interested they’ll move into due diligence, which means they want to find out a lot more information out about you and your business. This step two can take 1-3 months as well.

And then if you get through that process and they’re still interested, then you move into negotiation and closing the deal. This si simply getting all the terms down that you and the investor will agree upon into some legal documentation. This can be done anywhere from one week to one month.

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Where to find market, industry and competitive analysis?

Competitive research from The Starup Garage

Where to find market, industry and competitive analysis?

Welcome to video Fridays
from The Start Up Garage


A place where Tyler Jensen, The Startup Garage’s founder, answers questions directly from viewers

Key Take Aways From Video:

1) One of the first places I start with is industry associations or trade associations for that particular industry that you’re going to be in.

2) Google search — really getting into google and searching for the data that you’re looking for is a great place to start, especially on the competitive analysis because your competitors are going to be online most likely, or they’re probably not a competitor.

3) The library has access to a lot of databases. These databases cost a lot of money, but if you go through your library you can get free access to them.

4) Build a team of advisors These are probably the best resource.

Whether you have a question about your business plan or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Hiring an Independent Contractor or Employee

Hiring an Independent Contractor or Employee from The Startup Garage

Hiring an Independent Contractor or Employee

It is important that you know the difference between hiring an independent contractor vs. an employee so that you can determine which is best for you and your business.  Before reviewing the pros and cons of each, start by gaining an understanding of the differences between the two:

Independent Contractor

  • Operates under a business name other than your own
  • Operates as an employee under that business name and therefore limits your ability to control the contractors tools, processes, hours, etc
  • Maintains a separate business checking accounts
  • Represents the contractor’s business name and advertises his/her services as such
  • Invoices for work completed
  • Likely has more than one client
  • Keeps separate business records

Employee

  • Performs duties and responsibilities as dictated by you and your company
  • Requires added responsibility such as training, support, health benefits, management, etc.
  • Works for only one employer, your business

With a brief understanding of the differences between independent contractors and employees, you can begin to think of the benefits that each present.

Independent Contractor

  • Often cheaper in terms of associated labor costs and overhead
  • No health benefits are required
  • Flexibility in regard to only hiring when works is demanded of your company, especially for businesses that are seasonal or experience fluctuating streams of business
  • Reduction in liability
  • More flexibility in regard to hiring and firing

Employee

  • Stronger sense of loyalty and dedication
  • Employees can perform a variety of roles
  • Improved work flow, especially for businesses that experience a steady stream of business

It is important that you take the proper legal steps when hiring an employee or independent contractor and ensure that you hire them under the correct legal classification in order to avoid costly legal consequences down the road.

 

Whether you have a question about your Management Organization or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

The Three Categories of Non-Profit Corporations

The Three Categories of Non-Profit Corporations By The Startup Garage

The Three Categories of Non-Profit Corporations

Non-profits that choose to incorporate are classified into one of the following three categories.  The chosen category must be stated on the Articles of Incorporation that are submitted to the state for filing.  The three differ from one another primarily in stated purpose, how their assets can be distributed, and the amount of regulation.

Public Benefit Corporations

  • A public benefit corporation may be formed for either a charitable or a public purpose, may not distribute assets to members or directors, and are subject to the most extensive regulation.
  • A public benefit corporation may apply for a federal tax exemption as a 501(c)(3).  For more information on which public benefit corporations qualify under 501(c)(3), please read our blog post entitled Considering 501(c)(3)? Charity vs. Charitable.

Mutual Benefit Corporations

  • A mutual benefit corporation may be formed for any lawful purpose, may distribute assets to members or directors upon dissolution and are subject to less extensive regulation than a public benefit corporation.
  • A corporation with a public benefit or charitable purpose may file as a mutual benefit corporation to avoid the amount of regulation a public benefit corporation is subject to, but only if the corporations’ assets are not dedicated to a charitable, religious or public purpose.  Additionally, if a non-profit corporation wishes to file for a 501(c)(3) tax exemption, they are not eligible as a mutual benefit corporation.

Religious Corporations

  • A religious corporation may be formed for a religious purpose, and may not distribute assets to members or directors, but are subject to the least regulation of the three categories.

 

Whether you have a question about Categories of Non-Profits, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

What is a Non-Profit?

What Is A Non-Profit by The Startup Garage

What is a Non-Profit?

The purpose of a non-profit is to bring together a group of people that share an idea to change the world and that unite under a common goal for the specific change they seek.  Unlike the perception of a non-profit as a hippie volunteer operation, a non-profit business model is a great way to make a living while pursuing your desire to fulfill a need that exists in your community or beyond.

While the term “non-profit” does not reference a specific legal structure, it does signify that your group is working on a mission towards a specific goal rather than simply working towards profit.  Most non-profits will choose to incorporate and become a functioning business, and by filing as a non-profit corporation, the non-profit is eligible for various state and federal tax exemptions because the non-profit is working for a social and community benefit.  In return for the tax breaks, a non-profit has to follow certain organizational guidelines designed to ensure the effective pursuit of the non-profit’s mission, such as having a board of directors.

Significant differences between a traditional corporation and non-profit corporation include the success metrics.  While a profit corporation is successful if it earns a profit, a non-profit is successful if it is accomplishing its mission.  However, financial health is crucial for the non-profit to continue to operate.  As a non-profit generally does not earn revenue through sales, they are particularly dependent on fundraising efforts and grants.  Fundraising consumes a significant amount of time and effort from the non-profit, and demands a marketing and sales skill set amongst the non-profit’s employees.  But rather than selling a traditional product, you are selling your mission.

If a non-profit business model sounds like the best fit for your vision, read through the rest of The Startup Garage’s blog series on Starting a Non-Profit Organization.  We will have a new post every Monday and Wednesday with tons of information on how you can start your own non-profit!

 

Whether you have a question about Non-Profits, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Why Start a Business during a Recession

Startup Strategy Recession Going Up from The Startup Garage

Why Start a Business during a Recession

An African proverb says The best time to plant a tree was 20 years ago. The next best time is now. The same is true about starting your own business. The good news is we are in a recession. If that sounds like an oxymoron, consider these 4 reasons to start your business during todays recession instead of waiting for better economic times.

1. The national unemployment rate is in double digits. For a lot of people, starting a new business is the perfect way to find employment for themselves. Also, it is relatively easy to find employees that have the appropriate skills and training. Employing people to work for your business can turn out to be relatively cheaper than in booming economy. Hiring now might get you employees that are determined to over perform in order to keep their jobs.

2. The economic recession will force you to figure out a way to innovate and do more with less. The resources that your startup business can afford to waste are very limited and you will have to employ a do it yourself strategy for a lot of action items on your list. For example instead of hiring a marketing agency you might develop an inexpensive social media strategy to promote your business, or instead of hiring a graphic design firm to design your logo, you could use another beneficial strategy and trade professional services. This can help you gain assets for your business without spending precious funds and helps you build a network.

3. There will be less competition as competitors are also struggling with finding capital sources. So that makes it a ideal time to buy property, equipment and all else needed to start your business as the demand for resources is lower.

4. Marketing is expensive and a capital pressured startup can hardly afford it. Novice entrepreneurs also tend to have problems with the quality of their initial product. Creating a massive marketing campaign for a product that has not passed the test of time can turn out to have a negative effect on your business. Controlling the volume of your production will give you the opportunity to dedicate time and effort to product development and soon enough you might turn with a loyal following instead with a pile of one time unhappy customers.

It might sound counterintuitive to start a business during a recession but in fact some of the most successful businesses today have launched during times of economic struggle. Among those are Dell, Microsoft, Hyatt, Burger King, Fed Ex and CNN. Those companies became successful by recognizing the tough times and filling the needs of the market as best as they can using the economic disadvantages into their advantage.

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Whether you have a question about Why Start a Business during a Recession, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!

Benchmarking for Startups

Entrepreneurship Benchmarks from The Startup Garage

Benchmarking for Startups

In the business world there are a million different ways to measure success. In essence, what makes your business a success depends on your goals. So how do you measure your success? Its actually much simpler than you may think, using a process called benchmarking. Benchmarking is the process of comparing one’s business processes and performance metrics to industry bests and/or best practices from other industries. In fact, you should first be introduced to benchmarking in the earliest stages of your business, the business plan writing process, and more specifically the competitive analysis section of your plan. It is incredible how much you can learn from studying and analyzing your competitors, and a significant amount of research should be dedicated to doing just that.

In order to complete the competitive analysis section of your business plan you will need to gather as much information about your competitors as possible. The more information you are able to gather, the better the conclusions you will be able to draw from your research. The tricky part of benchmarking is deciding which factors actually apply to your specific market and your specific point in time. You will want to analyze not only the similarities between yourself and the competitors but your fundamental differences as well. This is a great opportunity for you to analyze your strengths and weaknesses compared to the competition. If you do this honestly and accurately, you will give yourself a better chance to improve.

Benchmarking is an effective tool to measure success if your business is already operating. Your goals should be clearly laid out in your business plan, and you should have a clear set of key metrics that you use to gauge success. Compare your list of key metrics such as gross revenue, net profits, profit margins, revenue growth, accounts receivable time, market share, liquidity, and turnover ratios to other industry participants and see how you are doing. This will give you a good idea of where you stand as compared to the industry average, and let you know where you need to improve as well as where you are already excelling.

Many business owners and people writing business plans do not thoroughly execute a benchmarking study because they think that they do not have access to their competitors numbers. This is probably because they havent looked for this data. Here are a few ways to track down some of the data that will be beneficial for benchmarking.

  1. Ask other business owners- Form alliances with similar businesses to yours, but located in other cities, so that you don’t compete directly. If you can agree to share financials with one another then you have a legitimate source for really good information.
  2. Ask an industry association- Industry groups often conduct polls of their membership in which business owners anonymously disclose information about their financials. While these won’t tell you how individual competitors are faring, industry statistics often give you good general comparison figures on how a typical business in your industry is doing.
  3. Buy or find market research- If you’re willing to spend, there is market research available on almost every industry segment.

Benchmarking is a very important process when comparing yourself to the rest of your industry. Do as much research as you can and dig as deeply as possible in order to find out the most information that you can about your competitors. Often times the answers to your problems are out there, you just have to spend the time and energy to find them.

 

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Whether you have a question about Benchmarking for Startups, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!