What You Should Know About Starting a Small Business

If you are considering starting a new small business or a new Ecommerce website, my hope is the outline below will aid you in deciding if owning a small business is right for you, and if you are prepared to be successful in a small business.

I have seen many startup small businesses walk through the doors of Ameravant Web Studio. “We need a website” they say.  So the work now begins to help them be successful with their website.  First we just listen so we fully understand their plan.  In many cases we sign non-disclosure statements to protect their ideas.  Sometimes their business plan makes sense, and we feel good that they will be successful.  Other times we don’t see a successful plan.  The common mis-perception is if you have a website with a product to sell, 1,000’s of people will come, buy your products and you will be “successful”.   It’s just not true.  

The truth is, owning an Ecommerce website is a business that needs much of the attention and financial support as a non Ecommerce website. “Build it and they will come” doesn’t work on the Internet.

I was asked recently to present to a class of Computer Science students at Santa Barbara City College. I was asked to speak on two subjects 1) how to start and run a successful small business and 2) how to create and profit from a software product .vs sell your services by the hour.

Below is the outline I passed out to the students. One student said “You are the best presenter we’ve had all semester”.  I’ve been asked back for a 2nd class. I hope you also get some benefit from reviewing the outline. If you think you need a website and want to review your plans with me, please call or email me. There is no charge for this type of meeting.

Santa Barbara City College – Preparing for a New Small Business

by: Michael Kramer
Ameravant Web Studio
www.ameravant.com
www.site-ninja.com
805-456-6011
[email protected]

1. Why I started Ameravant?
   1. Had a Partner for 10 years but never made any money
   2. Didn’t want to be a Tech Nerd but wanted Independence
   3. Knew I had the passion with technology to work 60+ hours per week, fail and yet continue to tweak my plan until I was successful
2. Starting your own business from scratch
   1. Get your client(s) 1st, before making big investments
   2. Keep your up-front cost down and plan for the worst (no clients)
      1. Have secondary source of income until your business can support you
      2. Work from Home, nights and weekends
   3. Engage in low-cost marketing
      1. Social Media
      2. Belly-to-belly networking.  Business and social groups
   4. Develop a professional website that makes you look bigger and more trustworthy than you make actually be.  “Fake it until you Make it”
   5. Negotiate “special deals” with clients to offset your newness, until you are able to prove to future clients you have a good track record.  My own example of my 1st $250,000 client.
   6. Market Test your product
      1. Survey your potential clients to see if they would user your product or service.  This is the cheapest form of market research.
      2. Ameravant has turned down several opportunities to develop websites because we didn’t think the client had a sold marketing plan, and would therefore fail.
   7. Hire or barter with Professionals to get expert advice or support
      1. Sales and Marketing
      2. Accounting and Finance
      3. Technical Support
      4. Graphic Design Support
   8. Budget for new software system every year
      1. Accounting system can change every 1-2 years
      2. Project Management System
      3. Software Development Tools
   9. Take time to calculate the cost of every profit center
      1. Cost to sell or market your product (Sales and Marketing Expense)
      2. Cost to deliver your software vs. monies receive
      3. Cost to maintain your software (fixing bugs, support calls, server upgrades)
      4. Cost to maintain your office (hardware, software, rent, supplies, utilities, cleaning service, Internet service, subscription services, etc)
      5. If you have employees, estimate the cost per employee, so you know if the product produced by the employee is more or less than the cost of the employee.
   10. Plan for Growth and Exit Strategy
       1. Make a specific annual plan for your product or service.  Make sure your activities are in line with your Plan
       2. How can you leverage yourself or product to make more money.
       3. Small businesses are valued at 2-3 times gross income
       4. Purchasers of small businesses usually retain the founders under a salary contract for a period of time.
   11. Product Based .vs Service based
       1. Product Based
          1. Focus on 1 product is more productive.  The product must have some compelling reason to choose it .vs other similar products
          2. Don’t try to have your product be all things to all men.  Pick a few key features and do them extremely well.  You can expand from there.
          3. Products can be easily and cheaply delivered.  This will leverage your investment and give you high profit margins.
          4. Create clear/published pricing for your products so people know exactly what they are purchasing.  It also help to up-sell clients that may not be aware of your other products or services.  
       2. Service Based
          1. You are exchanging your time for money.  This does not allow for maximum leverage
          2. People intensive – as your companies grows your employee cost are higher than product based businesses.  A good goal is to keep employee cost down.
          3. Find ways to leverage your knowledge.  Speak to large groups of people to deliver your service.  Create “canned” materials that you can quickly deliver.
3. Developing a software product
   1. Self funded .vs loans .vs investment capital
   2. Self Funded
      1. Take on client business that directly pays for the cost of your development.
      2. Don’t be tempted by potential clients that divert your attention on projects not related to enhancing your product.
   3. Loans
      1. Go to friends and Family 1st
      2. Bank funding is difficult for small business
   4. Investment Capital
      1. Not likely for small business.  For investment capital you must have a proven track record.  Investment funds usually pay for the expansion of current products, that directly relate to driving more sales.
      2. Levels of funding 1) Friends and Family 2) Self Funding 3) Current Clients 4) Bank Equity Line 5) Angel Funding 6) Investor Funding 7) Sell the Company
4. Cloud Computing .vs Server Computing
   1. Traditional Hosting
      1. Inexpensive share hosting or VPS hosting
      2. Unlimited FTP Accounts
      3. Built-in Server-side Email service
      4. Robust End-user Control Panels, like C-Panel
      5. Opportunity for Reseller Accounts
   2. Cloud Computing
      1. No FTP Service
      2. No Email Service
      3. No Visitor Tracking Service
      4. Unlimited growth potential for CPU, RAM and Storage
      5. Fantastic tools for deployment of environments
      6. Fantastic tools for deployment of applications/websites
      7. Fantastic tools for monitoring CPU, RAM and Storage
      8. Much more expensive than traditional hosting on shared accounts, VPS Servers or Dedicated Servers.