04- Sep2015
Posted By: Joe
92 Views

Business ownership: A Going Concern or Start from Scratch ?

Previously we were discussing, not whether to go into business, but the decision of which method made sense for you. A chicken or egg scenario. Do you start from scratch with just an egg? An idea that has yet to hatch but holds great promise or do you purchase some chickens, a going concern that is producing revenue and , hopefully, income.

Under the egg method you must have time. Time to weather the delays of a startup; the lack of customers, employees, revenues and spendable income. In fact the reality is you will most likely go deeper in the debt hole having no personal income for many months if not years. Do you have that kind of staying power (reserves)? Investors, if you can find any, will not allow you to spend their money on your living cost. So for sake of analysis let’s examine which is better, the chicken or the egg.

Your egg has a cost obviously much less than buying a group of chickens. But it does not produce current income. Let’s say you have spent $50k on your egg (idea) so far. Even when it hatches you’ll have to build up your “coup” of chickens letting other eggs hatch not taking income while this process build. You now have another $200k sunk into your business and / or debt from living expenses.

At $250k you could have bought a chicken farm, a revenue producing enterprise. You’d have debt but also income. You’d be buying a proven business because you did your due diligence and know the stream of revenue the business has been producing. You might have to spend a few dollars for sprucing up the business; perhaps a new marketing campaign but you have INCOME!

But my egg is a fantastic idea. Could be, I hope so. BUT 75% of all new businesses fail by or before year 3 and 85% by year 5. Risky?  You bet! Still want to be in business? Good. We’ll discuss alternative ways to make that happen while lowering the risk next.

Steve Ivey

15- Jul2015
Posted By: Joe
91 Views

So You Want to be in Business, Be an Owner, Master of your Own Destiny?

I love the way my partner, Steve, goes about explaining this.

 

Chicken or the Egg

So you want to be in business, be an owner, master of your own destiny?

The age old question in the title might be worth thinking about. Should you do a start-up with an egg or should you buy some chickens? A silly analogy?  Maybe not.

Many people dream of starting a venture. I’ve helped several hundred wanna- be- entrepreneurs work through this process. Many come in with the egg in hand, delicate, carefully guarded and full of promise. Perhaps they’ve decorated the egg to make it look more attractive and more advanced than other eggs. Convinced that their egg is unique yet they really aren’t quite sure what it will be when it hatches.  They rarely consider that it may not hatch at all. After a time of incubation where you’ve kept it warm and looked at it all hours of the night maybe even added a few more colors to it, it hatches.

You have a chick! They are furry, loud and ready to be fed. It was a chicken after all and you are very proud of this new creature, you probably give it a name even though you can’t tell whether it’s male or female (which is very difficult in young chicks). A few days later you realize that you’ll need another egg or have to buy another chicken to mate with yours or your precious egg, after lots of feed and care, will have provided you with 1-chicken dinner and be gone. Your great idea didn’t produce much and you really were never in business.

Of course you are smarter than that so you had several eggs or a partner who also had an egg that was compatible with your egg, Hmm, more about that another time. The point or question is: Did you save time or resources by starting with the egg versus buying some chickens. Both actions will get you to the same place. You thought the egg route would be simpler and cheaper. Let’s explore that.

 

Steve Ivey

Partner

NewGate Capital

18- Apr2014
Posted By: Allan
120 Views

Why That Ex-IBM Exec Could Be One Giant, Cash-Guzzling Liability to Your Startup

Picture this.

Young, starry-eyed startup founder comes in to pitch investors for funding.

He clicks crisply through his deck. He describes his product (patent-pending, of course), its features, benefits, and how 1% market share is enough to place everyone in the company on the Forbes list of richest people in the world.

Then the team slide comes up on the screen and the entrepreneur puffs up his chest, clears his throat, and announces that (just so you know) the CTO (or some other C-Suite position) of the company is an ex-IBM executive (or an ex-HP executive, or any other big, public company).

He pauses and looks around the room proudly. Almost as if he was expecting a standing ovation.

Oh, by the way, the company has raised $20 million so far, burned more than 50% of that on overhead (logo design, focus groups, salaries, and such), and hopes to have a minimum viable product in 24 months. Just as soon as this round of funding is completed.

See any problem with this picture?

Several actually. Let’s address just one today.

If you haven’t taken your product and service to market, if you do not yet have product-market fit, hiring an ex-Google COO to impress potential investors will almost certainly spell doom for your startup.

Here’s why.

One, your startup IS NOT a smaller version of a big, public company (HT Steve Blank). Your social media startup and Facebook are two totally different animals. One is a cute, needy kitten; the other is a full-grown lion. Your startup (the kitten) has different needs and needs a different set of competencies than a fully-functioning company.

Second, drawing from one above and quoting Ben Horowitz in his must-read book, “the job of a big company executive is very different from the job of a small company executive.”

To a big company executive (used to big budgets), that $2 million you plan to raise to take your product to market is just furniture allowance.

Former big company executives come with big company habits that could be deadly to your startup. Habits like sending everything to focus groups, analysis paralysis, bureaucracy, ego mania, and waiting for things to happen instead of making things happen (among others).

Bottom line: buyer beware.

Yes, you might need an Eric Schmidt or Sheryl Sandberg for “adult supervision” However, hire one with your eyes wide open and only when your startup has taken off and is approaching cruising altitude.

17- Mar2014
Posted By: Romain
127 Views

Ready for Entrepreneurial Independence?

You are ready for Entrepreneurial independence if you:

1. Take chances on your dreams and quit working for Corporate America.

Simply say to yourself, “No more renting myself for a paycheck, it is time to make things happen!”

2. Eat, sleep, and dream your startups or potential startup.

You begin to neglect your daily corporate duties because you are constantly thinking about ways to bring your idea to life.

3.Have some kind of support.

Your friends and family have knowledge of your commitment and are ready to advise, support, and guide you when needed.

4. Are different.

Unlike many, you have the ability to spot opportunities and issues that may arise.

5. Are ready to live cheap.

Entrepreneurs need A LOT of patience and will to take a financial hit for quite some time.

6. Are here!

If you are reading this then you know it is time for you to jump the ship.

 

Source: http://www.entrepreneur.com/article/229029