Talking to Entrepreneurs – Bay Schmooze IV

One thing that I like about talking with entrepreneurs is when you realize that a lot of what you know and take for granted is completely new to someone else. Two of the conversations I had yesterday were with entrepreneurs who are very early in the creation of their new busineses. Both are focusing on completely different different customers and attempting to solve different problems. However, they did have something in common. They are creating service business using the Internet as the place where they will conduct business.

I believe that anyone using a website as the primary communication tool between them and their customers should be either creating or re-designing their sites using software and tools that are designed to easily build communities, manage content easily, and support a wide range of media. This is not  based on some “Aha” moment of insight recently but from working with these types of tools for the past three years.

With so much press about MySpace, Facebook, LinkedIn, Twitter, WordPress, and other tools, I just assume that most people, especially in the age demographic of the entrepreneurs I was talking with, already know all about the capabilities these tools provide.

Entrepreneur one is about six month into development. The business is focused on providing information about an industry and the people and companies in that industry. Clearly this fits nicely into to social media/marketing space. I ask, “Are you going to provide your customers the ability to talk about their experiences, good and bad, with people and companies?”. “Not in the first phase, we are thinking about it as in Phase 2.

We talk about how the site is being created. The old way is to use standard web development tools including some combination of XML, CSS and PHPmaybe with something like Dreamweaver. Certainly a solution, but unless you become functional with these tools, you have to rely on a web developer for all changes to the site , which can be time consuming, frustrating and expensive (I realize that there are some supposedly higher level tools to help with changes like Contribute, but learning Contribute and managing content on a blog are miles apart).

Being so early into the development, I ask if they had considered using a Content Management System(CMS) based solution like Joomla or Drupal? More importantly they are open source (think Free Software), and have all the basic community tools built in. They hadn’t heard of this but were dealing with slowness of getting content on and off their current site.

Entrepreneur two is just beginning and has not selected a platform as yet. In fact, getting some insight on what to consider was among the list of things she wanted to find out during the Schmooze if possible. We had the Open Source conversation. She asked if I know of any developer resources that I would recommend, and I tell her about the San Diego Drupal Users Group that meets monthly (currently at the Hall of Champions at Balboa Park). I also mention that, if she wants to learn more about Drupal, meet more people and talk with some great resources from both San Diego and LA, there is a LA Drupal Camp scheduled for August 8th and 9th at UC Irvine. It is free, all you have to do is sign up.

Someone else mentions looking at similar, complementary  or competitive sites. She says she is having difficulty finding out who is talking. I ask if she knows about Technorati? “Doesn’t that have something to do with blogs?” I explain what Technorati is all about, and she writes down the web address.

Whenwe have been working in an area for a couple of years, especially one that is still pretty nascent to smalland medium business, we tend to forget who much we really know. So, it is great to talk with people who are just starting out and all this is new to them. You get to share some information, hopefully help them move forward and feel good about the conversation as time well spent.

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16 Responses to “Talking to Entrepreneurs – Bay Schmooze IV”


  1. 1 Ray Macy July 13, 2009 at 11:23 am

    Your site is worth beeing in the top cause it contains really amazing information.

  2. 2 Sage January 23, 2010 at 12:10 pm

    This is interesting information – there is just so much resistance to open source and I am sure there is scope for small IT businesses who can integrate and support open source.

  3. 3 Jim January 23, 2010 at 12:31 pm

    Sage:

    I think that as social media marketing becomes more prevalent in small and medium businesses, business owners will see the value of open source, which they will gravitate towards being “FREE”. Now free does have a price since most business owners won’t know how to create sites. Again, another beauty of Open Source is that the developers and themers who learn these applications are independent software developers who, in my experience, are a lot more affordable.

    Also, once business owners begin to understand that regardless of whether they have products or services, their primary business will be developing great content, which implies having a site that includes content management. Open source platforms like WordPress, Joomla and Drupal all are content management solutions with Joomla and Drupal also being great community building tools.

    Jim

    • 4 Laura January 28, 2010 at 5:56 pm

      Jim,

      I think that the information you have provided (I found you on YouTube) will be invaluable as I start moving forward looking for funding.

      The one thing that I have been researching and researching and can’t find an answer to, is how do the investors get paid back?

      So for example, I launched my company back in September 2009. So we are still a fairly new company, I am looking for an investor to invest about $40,000 into my business. How does the investor actually get paid back? Do I write the person a check each month? Are they paid quarterly based on profits? If someone did invest $40,000 how much could I expect to payback in return? I know these probably seem like simple questions but for someone who has never invested nor has had anyone invest in them financially before, I’m not sure how the process works after you get funding.

      Thanks in advance if you can answer my question.

      Laura
      LaBella Cupcakes

      • 5 socalbuzz January 29, 2010 at 11:06 am

        Laura:

        How investors are paid back is usually described in the Term Sheet, or where the terms of the deal are described. There are different types of investors and investments. So let’s start with borrowing money versus selling equity.

        Obviously borrowing is a loan and it comes with various types of payment terms and conditions. Most of the time, this is done through lending institutions like bank or credit unions although it is commonly used when dealing with “Friends and Family” situations. In exchange for the money, you agree to pay it back, over time, with some interest rate attached.

        Along with dealing directly with a bank, you should also look into an SBA Loan which is provided by a bank, but guaranteed by the Small Business Adimistration. You should also see what comes out of the President’s call for $30B to help small businesses, which will also be some program through banks or credit unions.

        There is a considrable amount of paperwork required when applying for a loan. You will need a clearly defined business plan. It should be short and to the point describing your overall market, how you segmented it, and what targets you are going after; your customer demographic and why they need your product; your competition and what you think your competitive advantage is over them; how you will distribute them, how you will make them; who is the team with specific backgrounds relevant to this business, how much you need; what will you do with it; and lastly, a minimum of 3 year financial projections with 18 months Cash Statement.

        The other type of investment is an equity investment. Here you give the investor a certain amount of stock in exchange for the money. You give up part of your company but there is no need to pay back the loan. In equity deals, investors get back their money when the business is sold or acquired.

        One way investors benifit from their investment is by the business structure you use. If you are an S Corp or an LLC, than profits or losses are passed on to the owners and shown on their individual tax returns. For simplicity purposed, let’s say that $40K buys them 40% of your business and at the end of the year, you show a $100k profit. You would get $60K and they would get $40K of the profits. You must remember that they still own 40% of the company. These payments do not reduce their ownership position.

        If you want to see how some of these negotiations start, it’s Friday and “The Shark Tank” is on ABC. You will see a lot of entrepreneurs like yourself trying to get some early stage dollars from some saavy investors. You can also watch some prevoius shows on ABC’s website.

        Hope this helps.

        Jim

    • 6 Sage February 17, 2010 at 3:29 pm

      I am writing this on a Linux machine and I installed opensource apps (Bugzilla was the best known plus three websites using open source content management systems ) in my last company (a small company with 30 employees). Now I work for a large organisation in the UK and the IT department won’t install anything that does not say MS or Adobe in the packet.

      There is still much resistance out there and IT departments are part of the problem.

      I do agree that small businesses with more IT savvy management are more willing to look towards opensource.

  4. 7 Laura January 29, 2010 at 8:09 pm

    Jim,

    Thank you so much for your quick reply. I actually watch the Shark Tank every week and I paused the show several times tonight and pointed out to my husband what they were doing wrong (based on what you said in your training videos).

    I have a solid business plan already written, the only thing you mentioned in your response above that I have not prepared is the 3 year financial projection but I will get started on that right away. The problem I have been running into even going through the SBA is that most banks want you to have at least 2-3 years financial statements under your belt before they will even consider giving you a loan, or at least that’s what I’ve been told by a few of the banks here in Cleveland.

    So…my quest for information led me to ask you these various questions. I’ll keep trying and see if I can make any progress. Currently I am preparing all of this information so that I can submit my request for financing through WECO Fund, so I hope that with your valuable information this will help me get the funding I need.

    Thank you again for your time, it’s greatly appreciated.

    Laura

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