7 Business Mistakes That Nearly Broke Me… Literally

Over the past 6 years I founded 9 .com companies. Most of the companies failed miserably and lost me a million dollars or so, but luckily a few of them did well enough to cover my loses. The main reason I had a lot of unsuccessful ventures is because I made some really big mistakes. Hopefully you can learn from my mistakes and not make them.

Don’t spread yourself too thin

A lot of good opportunities will come your way and your gut reaction will be to do them all, but don’t. I made this mistake and what ended up happening is that all of my businesses suffered, even the ones that were doing well. Within 3 to 6 months of me spreading myself too thin all my businesses suffered because I hadn’t spent enough time on each of them, even though I had employees and business partners who were helping me out. Remember, no matter how big or small your business is, you have to spend all of your time on it.

Pick the right type of incorporation

Not only is it important for you to incorporate your business, but it is important to get the right type of incorporation. It may not seem important when you are starting your company, but once you start making money it becomes a huge deal. For example, my accountant tells me that if your company makes under $200,000 in profit a year, a C corporation is good for you due to tax benefits. If you make more than that, consider getting an S corporation or a limited liability company.

I found this out the hard way, when my company started profiting 7 figures a year I had the wrong type of corporation. I ended up getting taxed twice, the company paid taxes on the profit and then I paid taxes on the dividends I got from the company.

Be careful whom you trust

I was working with a few developers and engineers for 3 months and they came to me with a business proposition. The first 3 months of working with them went well, so I decided to hear them out. The businesses opportunity they presented was supposed to revolutionize the hosting industry, but the catch was, they were broke. After hearing them out I ended up giving them some money for living expenses, I bought them a house to live in, and I was dumping 4 to 5 figures into the company every week.

To keep a long story short, they screwed me out of my money, stole stuff from the company, and ruined the house I bought. No matter how well you think you know someone, be careful, because you don’t know who is going to screw you over. One stupid mistake can make you lose thousands of dollars.

Have a thorough hiring process

If you really want to grow your company, you will need employees. You’ll probably post some job openings to find these employees or ask a few friends if they know anyone that you could hire. No matter how you get your applicants, go through each person with a fine-tooth comb. If a friend recommends someone, it doesn’t mean that they’re a good hire. I made this mistake multiple times by hiring developers, designers, and sales people that friends recommended. Just because someone did well at their last job, it doesn’t mean they will do well working for you.

Make your employees accountable

If you aren’t strict with your employees they will start slacking off after a while. And if you travel frequently like I did, they will really start messing around when you aren’t there. The first day a new employee starts, you need to be strict with them because it is hard to get employees out of bad habits.

During the first few years of being an entrepreneur, I didn’t hold any of my employees accountable. Every time they told me something, I took their word for it. On top of that I wasn’t strict when people came in 30 minutes late and after a while it became a daily habit.

To solve this I started using project management software, like Liquid Planner, and I made each one of my employees upload what they completed at the end of each day. This way I could keep track of what each employee did.

On top of that I made every one clock in and out. This allowed me to see who came in on time and who didn’t. At first I didn’t think it was a big deal that a few of my employees came in 30 minutes late each day, but over a course of a year it added up to 3 missed weeks.

Collect your money on time

Making money may seem like a hard thing, but collecting money from people can be even harder. In 2008 I worked for 8 companies that never ended up paying me. This wasn’t a few dollars either, a few companies still owe me over $100,000, sadly I don’t think they will end up paying.

With your business collect the money first before you provide anything. No matter how large a company may be, they can still go bankrupt. Things like contracts and debt collectors won’t help you much if the company doesn’t have money.

And for some reason if someone owes you money, whine to them until you get paid. If you act like you don’t need the money, you’ll never get paid. But if you whine and act like you are in financial trouble, hopefully they will feel sorry and pay you.

Time is not on your side

Especially with your first company, you will want everything to be perfect. The reality is, there will always be problems and nothing will ever be perfect. So instead of trying to make everything perfect, just launch your company before someone else beats you to the punch.

With my first software company, I wanted the software to be perfect before I launched it. I took so long in trying to make the software perfect that Google launched a competing product before I did. After that I had no chance of succeeding because Google’s product was free and mine wasn’t.

Conclusion

No matter what, you are going to make mistakes in life. Even if I told you every mistake that I made, you will still make more. If you want to succeed you can’t give up!!! Sooner or later you will do well, but like anything worth while, it takes time.

http://www.quicksprout.com/2009/01/14/7-business-mistakes-that-nearly-made-me-go-broke/

8 Mistakes To Avoid When Naming Your Business

Naming a business is a lot like laying the cornerstone of a building. Once it's in place, the entire foundation and structure is aligned to that original stone. If it's off, even just a bit, the rest of the building is off, and the misalignment becomes amplified. So if you have that gnawing sense that choosing a name for your new business is vitally important, you're right. With 18 years experience in the naming and branding business, I've witnessed the good, the bad and the really bad. To help you get off to a good start, read on to discoverthe top 8 mistakes I've found people make when it comes to choosing a name for their business:

Mistake #1: Getting the "committee" involved in your decision. We live in a democratic society, and it seems like the right thing to do--to involve everyone (your friends, family, employees and clients) in an important decision. This approach, however, presents a few problems. The first and most obvious fact is that you'll end up choosing only one name, so you risk alienating the very people you're trying to involve. Second, you often end up with a consensus decision, which results in a very safe, very vanilla name. A better method is to involve only the key decision-makers--the fewer the better--and select only the people you feel have the company's best interests at heart. The need for personal recognition can skew results, so you'll be best served by those who can park their egos at the door. Also make sure you have some right-brain types in the mix. Get too many left brains on board, and your name will most likely end up too literal and descriptive.

Mistake #2: Employing the "train wreck" method of creating a name.When forced to come up with a catchy name, many aspiring entrepreneurs simply take part of an adjective and weld it onto a noun, essentially colliding the two words head on to create a new word. The results are names that have a certain twisted rationale to them, but look and sound awful. Someone starting a high-end, service franchise becomes QualiServe. Someone starting a classy day spa becomes TranquiSpa. It's a bit like mixing chocolate syrup with ketchup--there's nothing wrong with either ingredient, but they just don't go together. Other common truncations include Ameri, Tech, Corp and Tron. The problem with this approach is that it's simply forced--and it sounds that way.

Mistake #3: Using words so plain they'll never stand out in a crowd.The first company in a category can get away with this one. Hence you have General Motors, General Electric and so on. But once you have competition, it requires differentiation. Imagine if Yahoo! had come out as GeneralInternetDirectory.com? The name would be much more descriptive but hardly memorable. And with the onslaught of new media and advertising channels, it's more important than ever to carve out your niche by displaying your uniqueness. Nothing does that better than a well conceived name.

Mistake #4: Taking the atlas approach and using a map to name your company. In the zeal to start a new company, many businesses choose to use their city, state or region as part of their company name. While this may actually help in the beginning, it often becomes a hindrance as a company grows. One client came to me with complaints that he was serving more of the market than his name implied. He had aptly called his business St. Pete Plumbing since he hailed from St. Petersburg, Florida. But Yellow Page shoppers assumed that was also his entire service area. With a little creative tinkering, we changed the image of St. Pete from a city to St. Peter himself, complete with wings and a plumber's wrench. The new tagline? "We work miracles!"

Many other companies have struggled with the same issue. Minnesota Manufacturing and Mining was growing beyond their industry and their state. To avoid limiting their growth, they became 3M, a company now known for innovation. Kentucky Fried Chicken is now KFC, de-emphasizing the regional nature of the original name. Both of these companies made strategic moves to avoid stifling their growth. Learn from them, and you can avoid this potential bottleneck from the beginning.

Mistake #5: Turning your name into a cliche. Once past the literal, descriptive word choices, your thought process will most likely turn to metaphors. These can be great if they're not overly used to the point of being trite. For example, since many companies think of themselves as the top in their industry, the world is full of names like Summit, Apex, Pinnacle, Peak and so on. While there's nothing inherently wrong with these names, they're overworked. Instead, look for combinations of positive words and metaphors, and you'll be much better served. A good example is the data storage company Iron Mountain, a name that conveys strength and security without sounding commonplace.

Mistake #6: Making your business name so obscure, customers will never know what it means. It's great for a name to have a special meaning or significance--it's sets up a story that can be used to tell the company message. But if the reference is too obscure or too hard to spell and pronounce, you may never have the opportunity to speak to that customer because they'll simply pass you by as irrelevant.

So resist the urge to name your company after the mythical Greek god of fast service or the Latin phrase for "We're number one!" If a name has a natural, intuitive sound and a special meaning, it can work. If it's too complex and puzzling, it will remain a mystery to your customers. This is especially true if you're reaching out to a mass audience.

I pushed the envelope a little on this one myself, naming my branding firm Tungsten after the metal that Thomas Edison used to create light. But because my clients consist of knowledgeable professionals who appreciate a good metaphor and expect a branding firm to have a story behind its name, I knew it would work. It's also a way to differentiate my services--illuminated, bright, and brilliant. But while something different might work for a branding firm, it wouldn't work as well for more common businesses, like an ice cream parlor or an auto body shop.

Mistake #7: Taking the Campbell's soup approach to selecting a name.Driven by the need for a matching domain name, many companies have resorted to awkwardly constructed or purposefully misspelled names. The results are company names that sound more like prescription drugs than real life businesses. Mistake #2 sometimes gets combined with this one and results in a name like KwaliTronix. It's amazing how good some names begin to sound after searching for available domain names all night. But resist the urge. Avoid using a "K" in place of a "Q" or a "Ph" in place of an "F". This makes spelling the name--and locating you on the internet--all that much harder.

And it's not that coined or invented names can't work--they often do. Take, for example, Xerox or Kodak. But keep it mind that names like these have no intrinsic or linguistic meaning, so they rely heavily on advertising to convey their meaning--and that gets expensive. Many of the companies that successfully use this approach were either first in their category or have large marketing budgets. Verizon, for instance, spent millions on their rebranding effort. So did Accenture. So check your pocketbook before you check into these types of names.

Mistake #8: Choosing the wrong name and then refusing to change it.Many business owners know they have a problem with their name and just hope it will somehow magically resolve itself. The original company name of one of my clients, for instance, was "Portables", which reminded some people of port-a-potties or portable classrooms--neither was accurate nor something the business owner wanted to be associated with. This added to the confusion when sales reps tried to explain their new concept of moving and storage. After some careful tweaking, we came up with the name PODS, an acronym for Portable On Demand Storage. The rest is quickly becoming history as they expand both nationally and internationally.

Mike Harper of Huntington Beach, California, bought a 30-year old janitorial and building maintenance company named Regency. We both agreed it sounded more like a downtown movie theatre than a progressive facilities management firm. After a thorough naming search, we developed the name Spruce Facilities Management. Spruce not only conveyed the environmentally friendly image of a spruce tree, something important to the client, it also meant "to clean up." The new tagline fell right in place: Spruce..."The Everclean Company."

It's only a matter of time before Southwest Airlines, Burlington Coat Factory and others who have successfully outgrown their original markets begin to question their positioning. Much like 3M and KFC, they may need to make a change to keep pace with their growth and image.

In the fever to start your new business or expand a current one, take time to think through some of these issues. By tapping into your creativity and avoiding these potential pitfalls, you'll be able to create a name that works for both the short and long term. Like the original cornerstone of a building, it will support upward expansion as your company reaches new heights.

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Phil Davis founded and ran a full-service ad agency for over 17 years before launching his business naming and branding consulting company in Asheville, North Carolina. His work can be viewed at http://PureTungsten.com.

http://www.entrepreneur.com/startingabusiness/startupbasics/namingyourbusiness/article76958.html

The 6 Biggest Mistakes in Raising Startup Capital

In the movie Little Fish, a video store manager played by Cate Blanchett applies for a bank loan to buy the business and expand into online gaming. When her application is rejected, Blanchett hurls a framed photo of the loan officer's child across the room in fury. Anyone who's suffered a similar setback knows the feeling.

The business landscape is littered with would-be entrepreneurs who've stumbled in their search for startup capital. Many requests are denied. Those who pass the test frequently have unacceptable strings attached. Some deals that close come back to bite the business owner in the form of onerous debt, insufficient revenue share or worse.

Part of the problem lies in the nature of the startup endeavor. Freshly minted entrepreneurs are typically major risks for lenders because they lack business experience, collateral to secure the loan or both. Neither family, friends, banks, venture capital firms nor angel investors are interested in losing their investment. You can't blame them for not wanting to take a risk on a venture without a reasonable probability of return.

On the other hand, many financing efforts fail because of avoidable mistakes that are made in pitching potential lenders, structuring the agreement or managing the money once the deal is done.

Steering clear of these missteps can increase your chances of success, both in obtaining startup funds and keeping the money flowing. Be sure to avoid these blunders:

1. Half-baked business plans-- There's nothing worse than going into a money meeting unprepared. If you haven't put the time and energy into writing a full-blown business plan complete with elements, such as a cogent business description, financial projections and a competitive market analysis, the people with the cash won't put the time into evaluating your proposal.

The SBA is a good source for learning how to write a business plan as well as sample formats.

2. Focusing too much on the idea and too little on the management--It's not enough to convince potential backers that you've invented the next must-have gadget or can't-miss clothing store concept. You also need a team that can generate the revenues to repay a bank loan or provide an exit strategy for a VC or angel investor. Many business novices ignore the second part of the equation; that can doom their money quest.

The greatest racehorse in the world still needs a great jockey to a win a race. The same principle applies in business. Showing that you have recruited a top-notch salesperson, a skilled marketer, an accountant with startup experience, other key personnel, and even outside experts like an attorney or business coach who can supply professional guidance is essential to finding a funding source.

3. Not asking for enough money-- In a 2004 U.S. Bank study of reasons for small business failures, 79 percent cited "starting out with too little money" as one of the causes of their collapse. That's often because entrepreneurs who are wet behind the ears don't realize that they should calculate their borrowing needs based on their worst-case scenario instead of their best-case forecast.

An old accounting axiom says that everything will take twice as long and cost twice as much as you expect. While that may be an exaggeration, new business owners are frequently too optimistic about how soon they will begin to fill their cash pipeline and how fast the money will flow. If you're underfunded, you won't have a cushion to tide you over in the event of slow initial sales or unexpected market conditions.

4. Having too many lenders or investors-- One of the hazards of securing financing from multiple sources is managing too many relationships and expectations. It takes time away from your core business. These not-so-silent partners may have conflicting interests or demands and the consequences can be devastating.

This is particularly true when you raise money from friends and family. One hairdresser I know borrowed money from seven or eight relatives to open her own salon. The business was successful, but there were perpetual battles over how the profits should be distributed. The arguments couldn't be settled to everyone's satisfaction, so the salon was forced to close.

5. Failing to get the proper legal agreements-- This is arguably more important than a prenuptial agreement for a couple with significant individual assets. Every lender or investor eventually will need his money back, and a legal document covering everything from the terms to the timing can avoid the kind of acrimony just described.

6. Poor cash flow management-- Too many new business owners burn through their seed money too quickly and fail to reach cash flow-positive status in a timely manner. Some causal factors, such as late product deliveries and economic downturns may be beyond one's control, but the executive team is clearly at fault for others, such as unnecessary spending and overly optimistic expense/income forecasts. Financial sponsors don't take kindly to that sort of mismanagement. And if they turn off the tap, all of your hard work may go down the drain.

There are other pitfalls to avoid, but the bottom line is this: Play by the lenders' rules to get them to open their checkbook, but protect yourself at the same time. There's no point in launching a business that will eventually sink under the weight of your investors' demands. If your business plan is good enough and you approach the right people, you should be able to whistle all the way to the bank.

Brad Sugars is the author of 14 business books including The Business Coach, Instant Cashflow, Successful Franchising and Billionaire in Training. He is the founder of ActionCOACH, a business coaching franchise based in Las Vegas, NV. Download the "5 Ways" iPhone app for more strategies and insights on implementing this powerful formula in your business.

http://www.entrepreneur.com/startingabusiness/startupbasics/startupbasicscolumnistbradsugars/article184350.html

10 Mistakes to Avoid When Selling Your Business

Most sellers don't expect the exit from their company to be easy, but many are surprised by how difficult it can be to sell their business for a good price in a reasonable timeframe, especially in the current economic environment. It's important, however, to not let frustration get in the way of maximizing your sale.

The majority of frustrations and challenges sellers experience could be avoided easily with a little information upfront about the pitfalls of selling abusiness in today's market. There are literally dozens of challenges to overcome in a business sale--but here are the 10 that could have the most significant impact on both your business sale and your peace of mind.

1.                  Insufficient Preparation
Lack of preparation is by far the most common mistake that small-business owners make. Just like you would spruce up your house before hanging a "For Sale" sign in the front yard, it's important to address several key aspects of your business before listing it in the business-for-sale marketplace. Financial documentation, sustainable profitability, lease issues, staffing problems and other concerns will not only impact salability, but also the price your business will command in the marketplace. Another thing to consider is that the time to start preparing for your business sale is right now--most brokers recommend owners start the preparation process at least two years before the business is listed.

1.                  Overconfidence
There's nothing wrong with being confident that you are going to successfully sell your business at a good price--unless your confidence causes you to neglect activities that are necessary to make your sale a reality. Far too many sellers go into the selling process with the confidence that they will get top dollar for their business simply because they believe that is what it's worth. In the real world, valuation is based on quantifiable criteria, not the owner's personal estimation of worth. To avoid this mistake, get an objective third-party valuation, or visit online business-for-sale websites to see comparable businesses for sale, early in the process. Once you've identified an appropriate valuation for your business, address the issues that could lead to increases in value.

2.                  Unwillingness to Leverage Professionals
You're an expert at running your business--not selling it. Yet it's always surprising how many sellers are averse to hiring a business broker to facilitate the sale of their business. Would it be nice to save the roughly 10 percent brokerage fee? Sure, but in most cases brokers are capable of adding at least 10-12 percent to the sales price. Even though there are certain circumstances in which a for-sale -by-owner approach makes sense, most owners are better off hiring a broker to handle important tasks like preparation, showing the business to potential buyers, marketing and negotiation. Likewise, don't hesitate to leverage the expertise of other professionals (e.g. accountants, lawyers, financial consultants) when you need them.

3.                  Taking a Hands-Off Approach
Once you've hired a broker, your work is done, right? Not a chance. Unfortunately, many sellers make the mistake of disengaging from the selling process once they've signed a brokerage agreement. Although your broker will work hard to market your business, no one has more motivation to sell, or inside knowledge about the business, than you do. If you haven't done so already, have a conversation with your broker about how you can proactively market your business without stepping on his toes. In addition, once the broker has found a few qualified buyers, you'll play a key role in instilling confidence in the buyer that the business can be purchased and managed successfully. Whether you like it or not, your interaction with the potential buyer will have a large impact on whether your business sells.

4.                  Failure to Pre-Qualify Buyers
Early pre-qualification of prospective buyers is essential for a successful business sale. Business sellers typically want to avoid qualifying prospects too soon for fear that will scare the prospects away. In fact, more often than not pre-qualification draws prospects deeper into the sale. More importantly, early pre-qualification protects sensitive information about your company from falling into the wrong hands and ensures that only serious buyers have access to key details of the sale. Pre-qualificationdocuments like confidentiality agreements and financial background information are standard requirements for prospective buyers interested in seeing critical information about your business.

5.                  Misrepresentation
As a seller, you want to portray your business in the best possible light. However, there is a big difference between representing your business in the best light and misrepresenting your business to prospective buyers. At some point during the selling process you will be tempted to exaggerate numbers, distort projections or even cover up problems. However, misrepresentations send up red flags when prospects review the actual financials and can become the basis for legal action after the sale. Talk to your attorney or broker about everything, including business forecasts, before passing the information on to the buyer.

6.                  Pricing Problems
Inexperienced sellers have a tendency to set a price (usually on the high side) before they've determined value. The reason this is such a big mistake is that price is the single most important factor in determining how long a business stays on the market. Sellers who have taken the time to conduct a thoughtful valuation process before assigning an asking price are more in touch with marketplace prices and better positioned to defend that price and to reap the benefit of a faster, smoother sale.

7.                  Only Entertaining All-Cash Offers
All-cash sales are unrealistic in today's business-for-sale marketplace. They can also be detrimental to sellers from a tax perspective. Instead of handing over a big chunk of cash at closing, today's buyers are more likely to need concessions in the form of seller financing, deferred payments or assistance in obtaining third-party financing. The benefit to you as a seller is that spreading sales receipts over a multi-year period can enable you to avoid higher tax brackets.

8.                  Breaching Confidentiality
Confidentiality is important. If the word gets out that your business is on the market, it could adversely affect sales and your relationship with your staff. A good broker will know how to simultaneously market your business and maintain strict confidentiality. If you're pursuing a for-sale-by-owner approach, it's a bit trickier but it can be done by creatively targeting your marketing efforts to a small handful of likely prospects.

9.                  Failure to Address Transition Issues
Many owners are so focused on selling their business that they completely neglect the transition process that will occur after closing. Some buyers will insist on the seller remaining on for a few months to assist with the transition or training, while others prefer a clean break. Either way is fine--as long as the buyer and seller have discussed the transition and reached a mutually acceptable arrangement during negotiations.

Whether you're selling on your own, or employing the help of a business broker, following these 10 tips will help maximize the success of your sale.

Mike Handelsman is Group General Manager of BizBuySell.com--located in San Francisco--and BizQuest.com, two business-for-sale marketplaces. Both sites feature business valuation tools that draw from the largest databases of sales comparables for recently sold small businesses, and two of the industry's leading franchise directories.

http://www.entrepreneur.com/money/buyingandsellingabusinessmikehandelsman/article207026.html