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10 Hot Startups

Why these independents made us say 'Wow!' Learn how yours can, too.

This story appears in the June 2010 issue of Start Up.

Starting Smart: 12 Things You Should Do
By Gwen Moran

Come up with great idea. Check. Choose a name and location. Check. Hang a shingle and open the doors. Check and check. Now what?

Starting off on the right start-up foot is key to ensuring the long-term vitality of your business, says Bern Lefson, a spokesperson for the Small Business Administration's Service Corps of Retired Executives, (SCORE), a free consulting organization staffed by volunteer veteran business owners. Beyond your passion, which is essential to success, most experts agree there also are some universal best practices - many often overlooked - that should heed. Here are the most important:

Get smart. Information is everywhere, so there is no excuse for being uninformed about your industry or about business in general, Lefson advises. Each state has SCORE chapters and Small Business Administration Small Business Development Centers (SBDCs), which offer a variety of resources and free or low-cost access to knowledgeable business advisors. It's old-school, but also drop by your local library and make friends with the reference librarian. Libraries often have on-site resources, directories and reference materials, or have access to business directories and databases that often require expensive subscriptions, he says. These can give you valuable data about market size, demographic and industry trends. Use your favorite search engine to look up your industry associations, as well as the web sites of other businesses doing what you want to do. That can give you insight into what your competition is doing.

Seek counsel. Read this carefully: You need a good accountant, a good attorney and a relationship with your banker. This trio will help you make wise decisions about everything from how to organize your business--LLC or Subchapter S corp., for example--to how to get the money you need and be sure you're abiding by the letter of the law. They may even be good business referral sources, says Nick Nanton, Esq. a partner in Dicks & Nanton, a law firm in Altamonte Springs, FL.

Protect yourself. Entrepreneurs face uncertainties every day. It's your job to make calculated decisions and minimize the consequences of risk in whatever way you can, says Nanton. First, that means protecting your idea through patents, trademarks and copyrights, where applicable. In addition, keep records of the development of your idea, which can provide valuable proof of your rights and prevent others from stealing your intellectual property. In addition, tap your trio of advisors to help you organize your business to minimize your personal liability, obtain proper insurance and determine what other risks you might be facing so you can mitigate them, he adds.

Make a plan. A is a critical tool to help you map out our business on paper, identifying opportunities and obstacles so that you can deal with them appropriately, says Lefson. Most lenders and investors will want to see a solid business plan that reflects a thorough understanding of the market and the business' role within it. The plan will include explanations of what your business is, who your employees and key personnel are, financial projections, and expected and activities. It may also include a growth plan and other elements. And if that seems like too much to handle on your own, SCORE and most SBDCs offer counseling to help entrepreneurs craft their business plans.

Mine for gold: Billy, 38, and Alissa Maupin, 37, pore over their customer data at Green Tango Fresh Chopped Salads in Durham, North Carolina. As orders arrive in-person, or by phone, web site and text, employees capture information about customers and their preferences. Now, they have data on thousands of customers, allowing them to track ordering habits and trends, while giving them important info about inventory levels. Look for trends in your own data, says Turner. You may see seasonal upticks, product pairings, or other important clues about why and when your customers buy, which can influence sales and marketing efforts.

Get noticed. You could have the greatest offering in the world, but if people don't know about it, you're sunk, says small business expert Marcia Layton Turner, author of The Unofficial Guide to Starting a Small Business. Increasingly, that means developing an online presence. Turner says that all businesses, from the local dry cleaner to the fast-growth information marketing company, should have a web site. She also advises wise and business-based use of . "Set up a Facebook fan page, watch Twitter to see who is saying what about your company and leverage your LinkedIn connections to find new clients, employees or suppliers." Use the good information you've collected to invest in marketing activities that target your best prospects.

Sell like hell. Look at all of the channels you can use to sell your products and services, says Turner. They may include wholesaling to other businesses, selling through a web site, aggregator, auction site, or bricks-and-mortar store. Catalogs, manufacturers representatives and affiliate programs are other ways to make your sales reach broader, says Turner. And don't ignore your employees: Green Tango employees wear T-shirts, hats, aprons and buttons with different branding messages, using uniforms to draw attention new products or promotions. Employees are also trained in how to engage customers for greater sales. Horowitz looks for ways to grow his business and his clients' through partnerships. The launch of his latest book included a joint promotion with Green America, promoting the book to its 94,000 members in exchange for a 25 cent donation per book sold for one month.

Measure it. Small businesses need to do a better job of tracking the results they achieve from various investments, says Turner. This is especially true when the money is tight. Before you spend, she advises collecting information about your customers and what is driving them to your business. Look at the various activities in your business and see if there are ways to do them cheaper or more efficiently. In some cases, it may make sense to outsource certain aspects (e.g., payroll, training, or IT) that take away from your core business without adding value. When it comes to marketing, if you know which marketing tools are bringing in customers who spend money, you'll want to allocate more money for those efforts, she counsels. "By tracking, you can see that the press release you issued brought in 1,000 prospects and 90 sales, but the tweet you sent about a special offer brought in 200 prospects and 180 sales. They were both effective, but your efforts should focus on the best return on money and time," she says.

Watch the money: Playing fast and loose with your cash is a sure-fire way to bring your business down, says Lefson. Whether you're bootstrapping or you just got a fat capital infusion from an investor, be careful about where you spend. Small business consultant and co-author of "Guerilla Marketing Goes Green," Shel Horowitz routinely advises his clients to be frugal: "Do you really need that $2,000 desk? Do you really know which investments are paying off for you?" When you keep your expenses very low and watch your cash flow, he adds, "you increase the likelihood of success." Lefson advises effective tax planning is essential. And, when possible, securing a line of credit to tap during hard times is a good idea, too.

Hire right. You can't grow your company without good people, says Lefson. However, a common mistake entrepreneurs make is hiring people they like instead of people they need. Use written job descriptions to define the skill sets you need and make decisions based on what is best for the company--not necessarily who you'd like as a lunch buddy.

Grow and enjoy. Turner advises small businesses to look for efficiencies and develop systems and processes to ensure that the business can grow without too many pains. This, again, is where your business plan can be useful in helping you monitor where your business is vs. where you planned it would be. As your best practices start to pay off and your company begins to grow, it's essential that you monitor your money and projections to make sure they're on track and make adjustments, as necessary, says Lefson. "For a lot of small businesses, the road to success is a good business plan, a good , and sufficient capital resources. Without those, the odds are stacked against them," he says.

Stay true to yourself. You can get all of the expert advice in the world, but you know your business better than anyone. You started it because you have a belief in it. When you care so much about something, says Lefson, you're usually in tune with making the best decisions for it, Lefson says. So, yes, take the good advice, but use your talent, knowledge, common sense and gut to move it forward.

Gwen Moran is the co-author of The Complete Idiot's Guide to Business Plans.

10 Hot Startups

A "hot" startup company isn't the entrepreneurial equivalent of a winning lottery ticket. Probe a bit beneath the surface, and what you'll find is a combination of creativity, determination, hard work, great products and services--not to mention a strategy that produces rapid growth. They are the companies that capture the hearts and minds of their potential customers and, with them, that indispensable thing called market share. They're invariably run by men or women with an eye for sustainability--and expansion. The list runs the gamut of sectors. Some have venture capital money behind them; most were bootstrapped. Some are service companies. A few are manufacturers. Others are retailers. And while we routinely receive news of hot startups, and it's usually impossible to compare apples to oranges--or in the case of this list, apps to beer--these 10 independents, with their fast-paced success and future potential, are the ones that made even our seasoned staff and contributors say, "Wow!"

1. Cigar City Brewery
Tampa, Fla.
Founded: 2007

Self-described "beer geek and home brewer" Joey Redner had been around craft breweries for years. He had worked for both a craft beer brewery and an importer. He wrote a column about craft beer for the St. Petersburg Times. And, all the while, he thought about what it would be like to run his own enterprise. In a city the size of Tampa, it was only a matter of time before someone opened up a local craft brewery--and in 2007, he decided to be the one to do so. Using local flavors like guava and high-end ingredients, Cigar City Brewery's brews are more expensive, but have caught on far beyond the Tampa city limits. "We have a great demand in the northeast. People from Philadelphia were calling their relatives in Tampa and asking them to get our beer," says Redner. Launching a beer company is no easy task, but those thirsty customers have driven up brewing volume tremendously: The company sold about 1,000 barrels in 2009. By the end of the first quarter of 2010, it had already exceeded that threshold and was on pace to sell more than that per quarter throughout the year, marking more than a 400 percent growth in 12 months.

2. VeryMeri
Encino, Calif.
Founded 2006

Whenever first-grade teacher Meri Zeiff saw one of her students wearing a shirt that said, "Spoiled Brat" or something similarly negative, it bothered her. After years of listening to her daughter gripe about the same pet peeve--and her desire to start her own company with positive T-shirts for kids--her mother handed over $2,500 and told her to do something about it. That something was the launch of her T-shirt company, VeryMeri. In addition to creating kid-power T-shirts--sentiments include "Peace, Dude," "I'm a lucky ducky," and "Imagine"--she also donates a percentage of her profits to charity. Now, the company takes submissions for T-shirt designs to be voted on by the public. Each winning designer has his or her T-shirt produced and 3 percent of profits from the sales of those shirts go to a designer-chosen nonprofit. More than $50,000 has been donated to various charities so far. Do the math.

3. Smule
Palo Alto, Calif.
Founded: 2008

As the app world explodes, one of its perennial hit-makers is Smule (aka Sonic Mule), the iPhone application developer responsible for popular mobile phone apps like "I am T-Pain." "Ocarina," and "Magic Piano." Founders Jeff Smith and Ge Wang, both tech company veterans, have grown the company fast, landing nearly $12 million in hard-to-get venture capital in two rounds over the past year, allowing them to invest in more people, more infrastructure and more app development. Smith says Smule has "three gigantic things in the hopper now," presumably apps, although he declines to specify. The company is also building the "Sonic Network," a cloud network of its application users, which allows users to connect with each other through the network. Smith suspects it will ultimately be a building block for the company, uniting users.

4. Sevans Strategy
Elgin, Ill.
Founded: 2009

When Vanity Fair magazine calls and wants to feature you as a leader in your field of expertise, it's a good day. That's what happened to Sarah Evans, founder of Sevans Strategy, a new media and public relations consultancy. In the six months since she founded her business, Sarah has landed a beefy six-figure client roster that includes Fox News Chicago, Fox Corporate, Qmobius and Radio Shack. Evans is a highly prolific tweeter and Facebook participant, using social media and public relations as part of the counsel she provides to her clients. In addition, she's become a prolific speaker on social media topics, boosting her notoriety and spurring her projected 120 percent growth in 2010 alone, including the hire of three full-time employees.

5. Frogbox
Vancouver, BC and Seattle
Founded: 2008

After Doug Burgoyne had moved several times, schlepping his family's stuff in flimsy cardboard boxes, his frustration told him there had to be a better way. In addition to breaking apart, the cardboard boxes were wasteful and a drain on resources even when recycled. His wife, who worked in retail, mentioned that her company transported its wares in reusable plastic boxes. Bingo. Burgoyne realized he could rent the boxes to movers, providing an eco-friendly alternative. The idea has caught on and the firm plans to crack the $1 million revenue mark this year, with aggressive expansion plans to be in the top 30 cities in North America within five years. An international marketing award bestowed by advertising giant Leo Burnett, which includes $250,000 in marketing services, may help Frogbox do just that.

6. Foursquare
New York
Founded: 2009

You may not be ruler of all you survey, but you could be mayor of your favorite coffee shop. Foursquare can best be described as a convergence of traditional social media like Facebook and Twitter and real-life meet-ups. Users "check in" from their locations and can also see where other Foursquare contacts are to join forces. This game-like aspect of Foursquare, especially the mayoral designation, has fostered good-natured competition among customers, who may stop by the shop and check in via smartphone two or three times a day to keep top-visitor status. The person who checks in the most from any given location is named "mayor" of that location, and endowed with bragging rights and, sometimes, prizes. At press time, there were rumors that Yahoo! was considering buying the upstart, co-founded by Dennis Crowley and Naveen Selvadurai in 2009, for $100 million.

7. Consult A Doctor
Founded: 2007

Whatever happens with health-care reform there will be one constant: The need to cut costs. And that is what entrepreneur Wolf Shlagman is banking on with Consult A Doctor, a telemedicine company that offers the clients of health plans, self-insured groups, third-party administrators and other benefits providers round-the-clock remote access to physicians via phone and e-mail, making expensive, inconvenient medical office visits unnecessary for non-emergency situations. Shlagman was working with a startup internet company in 2002 when he saw that the same remote advantages found in the tech sector could apply to medicine. He spent a few years developing his idea and then teamed up with former co-worker Elan Shanker for the company launch. The year of their launch, the National Center for Policy Analysis reported that nearly 55 percent of all emergency room visits were non emergencies. The center found that people were using emergency rooms for primary care access because physicians weren't available by phone or e-mail outside of the office. Shlagman says these core problems are exactly the type of issues his company solves.

8. Game Truck Party
Tempe, Ariz.
Founded: 2006

It was 2006 and Scott Novis was frustrated with the pizza arcade experience at his son's 4th birthday party. Children were running around unmonitored, and the games were boring and static; most of the kids had better games and graphics on their home game boxes than what was being offered at the party. So not long afterward, he went home and, in his garage, retrofitted a truck with gaming consoles, flat-screen monitors and cool interiors, creating the first GameTruck portable gaming party. He threw a birthday party for a friend and, soon, GameTruck was a thriving weekend business. Since then, the company has grown to nearly $2 million in revenue, and is thriving with nearly 40 trucks in 20 locations across the country and 12 employees in its home office. The company also offers franchise opportunities.

Charlestown, Mass.
Founded: 2009

The Census bureau estimates that the number of people age 65-plus will shoot from 40.2 million in 2010 to 88.5 million in 2050, and some estimates put the eldercare market at nearly $200 billion. At 26, Meagan Shea isn't anywhere near that demographic, but she's serving it well with, which helps aging adults and their caregiver children more easily find care solutions. Shea came up with the idea after going through the onerous process of relocating an aging relative across the country, trying to find appropriate medical and care facilities and services. It inspired her to make an online information and content center for caregivers of aging relatives. was one of 15 of 42 businesses selected for development by Shea's peers as she was finishing her MBA at Babson College. Using $79,000 from family and friends, she launched last July and now has a database of more than 5,800 services. Two of her classmates have joined the company, and they will be rolling out nationally in late 2010.

East Lansing, Mich.
Founded: 2008

In 2008, then-MBA student Sam Hogg opened his wallet and stared at one of several plastic gift cards he had received for Christmas, thinking how wasteful the cards were. So, instead of paying attention in class, he began to form a business model. Later that year, he launched East Lansing-based, an electronic gift-card aggregation site that has the potential to dramatically downsize a wasteful supply chain of tiny plastic cards. "I looked at gift cards and saw that 75 million pounds of them go into landfills every year," Hogg says. "If people heard that, they would never buy another plastic gift card." And the site is catching on. Since's founding, use has increased 2,100 percent and has grown from 120 to 275 retailers. Hogg created his own website, which places competing retailers next to one another--a model outlined by a college marketing professor who suggested consumers are more likely to buy a product when given multiple choices, even if those choices sit next to competing brands. He gets ongoing support from the professors and classmates at his alma mater, Michigan State University. "You don't need an MBA to start a business, but I couldn't have gotten that from scratching my head in a basement," he says.

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