Looking for investors? Wondering about the best benefits for your employees? Read on for answers to these and other crucial business questions.
Q: My company needs an influx of operating revenue. How do I find investors for my business?
A: Your first question should be, "How much do I need?" If we aren't talking millions of dollars, friends and family are some of the most dependable resources for any entrepreneur. If you've already tried that, you should consider other options, such as a small-business loan, an angel investor or venture capital.
Finding investors is really a matter of networking. Unless you get lucky, it's going to take some time. For starters, talk to your banker, who may want to offer you a loan, and may also know potentially interested investors. You should also talk to your chamber of commerce, as well as any business organizations you belong to.
Not surprisingly, the internet can help you find angel investors and VC groups fast. Check out the National Venture Capital Association's website. Under the "Resource Area" tab, you'll find numerous descriptions of, and contact information for, regional VC associations, such as the Atlanta Venture Forum and the Colorado Venture Capital Association. Angel investors aren't quite as organized, but there are organizations that match up angel investors and entrepreneurs. Active Capital is one national angel investor organization. Angel Capital Association (www.angelcapitalassociation.org) is another; it will lead you to approximately 200 regional sites across North America, including Alliance of Angels, which is based in Washington state and focused on high-tech operations.
You could spend all day on the web looking at the organizations available before you even decide who to contact. But be warned: Unless you have a business plan, you're not going to get far. Everybody--save maybe your Uncle Mel, who might not be as discriminating--will want to know what you intend to do with the money that you want invested in the company. They're going to want a solid five-year business plan that includes projections and details how your business makes money, who your customer base is and how you intend to market to them--almost no detail is too trivial. So before you search for investors, buy some software or a book that can help you write a plan, or go to an organization like SCORE or your local Small Business Development Center and ask for help with writing a business plan.
Q:I'm on a budget. Can I afford to do market research?
A: You can't afford not to. Whether you're starting a business or releasing a new product, you have to know if there's a need for your product or service. If you're running a business and plan on releasing a product or service that customers have clamored for, then obviously, you've done some market research. In the case that you already know there's a need for what your business is going to do, you might want to collect thoughts from your existing customers about how much they'd pay for your new product or service, and what they really want out of it.
If you are starting a business but aren't certain there's a need for what you're offering, try contacting people or companies you think may be potential customers. If you come across as earnest, competent and capable, most people are going to want to help you by spending a few minutes talking to you, and you may find that some of these people will, indeed, someday become clients. You should also consider talking to the people at the top of your industry, whether at the chamber of commerce or at industry associations. You could attend a trade show and just talk to anyone you can find about the need for a business like yours, provided you're sure you're not going to give away any of your own trade secrets.
Keep in mind that the chamber of commerce sometimes has its own market research it can share with you. For instance, if you plan on opening a restaurant and are considering renting or buying a property on a street corner, you may find that your chamber of commerce can tell you how much traffic goes by the property on a given day.
Hiring Employees and Business Insurance
Q: My business is growing rapidly, and it's more than I can handle by myself. What kind of employee should I hire?
A: The obvious answer is that you want to hire somebody who is competent, able to work for whatever you can pay and truly interested in helping you grow your company. But to find an employee who can help your business, the question you really need to ask is, "What type of boss do I need to be?"
That's because the best way to hire and keep an ideal employee is to be an ideal employer. If you can't offer a health plan, for instance, you should provide other perks, whether it's flextime or permission to bring a pet to the office. If you're the type of boss who people want to work for, and your company offers its staff opportunities that they feel they can't get somewhere else, good employees will gravitate toward you.
There are some important guidelines to consider when hiring your first employee. You need somebody who has skills or talents you don't have. Look at all your shortcomings, and if your prospective employee seems to have qualities you wish you did, that's somebody worth considering. Even a slightly different mind-set about the business world might prove helpful. Certainly, you need to be able to work together, but if you hire a clone of yourself, your business won't have the varied skills and opinions that a successful company needs to move forward.
Q:I know I need business insurance, but how do I know if I have the right policy?
A: Although some people may disagree with this statement, you can almost never be over-covered, especially in this day and age. Unfortunately, you'll never really know if you have the right business insurance until you retire or sell your company. By then, if you've gone through any crises and didn't lose money or much income because your insurance company was there for you, you'll know that you chose wisely.
Employee Benefits and Contracts
Q: What kinds of benefits should I offer my employees? My business is growing, but I'm not sure how much I can afford to offer them.
A: A lot of business experts and entrepreneurs ascribe to the idea that your employees should be who you look out for first, followed by your customers. It's not just Pollyanna-type thinking. If your employees are happy, they're going to look out for your customers. If they're not happy to work for you, then you're steering a ship with sailors who really couldn't care less if the business runs aground.
So the answer is: Offer as many benefits as you can without seriously hurting the health of your business.
The types of benefits you have to offer, according to the law, probably won't be a surprise, but nevertheless, here they are: You need to allow your employees time off to vote, serve on a jury and perform military service. You must comply with all workers' compensation requirements, withhold FICA taxes and pay your own portion of FICA taxes, giving employees retirement and disability benefits. You have to pay state and federal unemployment taxes so your unemployed workers can receive benefits. If your state requires it, you also have to contribute to state short-term disability programs, and if you have 50 or more employees, you must comply with the Federal Family and Medical Leave Act.
You don't have to offer a 401(k) plan or a life insurance plan. Unless you're in Hawaii, you don't have to offer a health plan, either. You don't even need to give employees paid vacation, holidays or sick leave. Most employers, however, provide (at minimum) paid holidays for New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. And if you don't offer some type of benefit to your employees, even you will have to wonder: Who will want to work for me, and do I really want that type of person working for me?
Q:I'm establishing a partnership of sorts with a vendor I've been working with. How do I write the contracts?
A: There are numerous books and software that can help you write a business contract, including Ultimate Book on Forming Corporations, LLCs, Sole Proprietorships and Partnerships by Michael Spadaccini and Business Contracts Kit for Dummies by Richard D. Harroch . A lawyer doesn't need to be brought in, but if what's at stake is complex and worth millions of dollars, then you'd be foolish not to have an attorney look over your contract.
In your contract, some items you should cover are the obligations that you and the other party are expected to fulfill. If something goes wrong on your end, you should limit your liabilities--and likewise, the other party will expect the same gesture in return. You should set a time frame under which the terms of the contract will be met, as well as how each party will pay or be paid. And you'll want to have some language that keeps your contract flexible. People are human--they finish projects a day or two late, or they pay a week or two later than they intended. That may be acceptable to you if the other party is in contact with you and you know what's going on. Contracts aren't designed to hurt anyone; they're designed to keep businesses from being hurt if another company isn't keeping up its end of the bargain.
Patents and Online Marketing
Q: I have an idea for a new product. Do I need a patent, and how do I get one?
A: Yes, you do need a patent if you want to protect yourself. The U.S. Patent and Trademark Office website is an extremely comprehensive site with forms, fee rates and instructions on how to apply for a patent online.
If it's just a basic filing fee to cover your idea, and you're considered a small business or you're an entrepreneur working alone, you'll pay $150; double that if you own a large company. But the deeper you delve, the more you might pay: You can pay patent search fees (if you're not sure if there's already an existing patent that covers your idea), patent maintenance fees (every several years, you'll need to renew it), and all sorts of obscure patent fees from design filing fees to patent application extension fees. Still, chances are you'll just pay $150 and only have to worry more about patents if your product turns out to be a success. In that case, you'll probably be hiring a patent attorney.
You may even have a business practice that could be covered by a patent, something in which you've invested time and money. For instance, Amazon.com's 1-Click system, which allows repeat customers to bypass address and credit card data forms, has been patented (although it's now being challenged in court). The benefits are immediately obvious: You can patent a business method for 20 years, keeping competitors from using it, or you can license it out.
Some books you'll probably want to check out include Patent It Yourself by David Pressman (Nolo, $49.99), and Patents, Copyrights & Trademarks for Dummies by Henri Charmasson (John Wiley & Sons, $21.99).
Q:I know it's important for me to market my business online. How do I get started?
A: Getting your website in front of customers is important for every business. One way to market yourself is to consider having a blog or even a podcast, which is basically a video or audio blog. You can set these up for free at websites like Blogspot.com and MSN Spaces (http://spaces.live.com). Many web-building sites will also help you set up your own blog.
If you're not the only one updating the blog--your employees may help, too--that will invariably make it more manageable and fun to read. If you can attract some diligent, devoted consumers who read it frequently, you will probably have those customers for life, but even people who read it just once will be able to get a sense of what your company is about. A blog also helps your venture feel like a live, vibrant place of business rather than a static, never-changing company, which sometimes can be the feel of a website.
And then, of course, there's pay-per-click advertising. The three leaders in this field are Google AdWords, Yahoo! Sponsored Search and MSN Keywords. Advertising on all three is a cost-effective way to drive shoppers to your website.
For more answers to your most pressing business questions, visit our Small-Business Answer Desk.
Geoff Williams is a writer in Loveland, Ohio.