How to Build a Company to $1 Million in Sales: Before You Graduate

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How to Build a Company to 1 Million in Sales
Before You Graduate

• Presented ByRyan P. M. Allis, CEO Broadwick
  Corp.
• Author of Zero to One Million
• October 29, 2005
• CEO Conference Orlando

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Speech Introduction

• What Im Going to Talk About
• Personal Background

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Personal Background

• An 11 year old on the west coast of Florida
  helping seniors to use their computer for 5/hour
• A 14 year old with a growing web site design firm
• A 17 year old VP of Marketing of a company that
  went from zero to one million dollars in sales
• A 19 year old published author and CEO of a
  investor-backed software company
• A 21 year old CEO of a company doing 1.7 million
  in annual sales

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Speech Introduction

• What Im Going to Talk About
• Personal Background
• Business Background

Email Marketing Software www.broadwick.com
Web Marketing Consulting www.virante.com
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Our Team
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Ten Steps to Building a Company to 1 Million in
Sales

1. Decide what to sell
2. Evaluate your Idea/product
3. Decide which type of company to form?
4. Raise funding, or bootstrap and grow organically
5. Determine your market positioning strategy
6. Develop your marketing sales strategy
7. Build your team
8. Become a good manager
9. Build strong systems
10. Scale the Model

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Deciding What to Sell
STEP 1

• Four methods for coming up with business ideas
• Continuously be aware of the products you use
  everyday. How can they be better? What need or
  pain do you have that could be fulfilled by a
  product or service that is not currently being
  provided?
• Go to networking events, seminars, and
  conferences like this one. You may find someone
  with a good product or a good idea that is
  looking for partners.
• Read magazines and publications that cover the
  industry you are interested in.
• Intern or get a job at a company in the industry
  you are interested in. Work there to get
  experience and build contacts. Many times you
  will see product ideas in the course of your work
  that your company will choose not to pursue.

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Product/Idea Evaluation
STEP 2
Product/Idea Evaluation

• The key questions
• Does this product or service fulfill a real need?
• Is the need that this product fulfills worth the
  price you plan to charge?
• Other Questions to Ask
• Does the product increase pleasure, increase
  utility, or reduce pain?
• How valuable are the benefits the product gives
  to the customer?
• Must the product be reordered?
• Can a back-end for the product easily be
  developed?
• Can it be obtained or produced for a low cost so
  as to support a high margin?
• What is the current demand for the product?
• Is this demand expanding?
• How many other competitors are selling the same
  or similar product?
• How many serious competitors are there?
• What are the sales figures of these competitors?
  
• How can the product be differentiated from
  competing products?

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Product/Idea Evaluation
STEP 2
MAR Model for Opportunity Evaluation MAR Model for Opportunity Evaluation MAR Model for Opportunity Evaluation
MARKET ADVANTAGES RETURN
Need Barriers to Entry Investment Needed
Pricing Cost Structure Time to Breakeven
Market Structure Intellectual Property Expected Profitability
Market Size The Team Exit Strategy
Timing Business Strategy Expected Investment Return
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Which Type of Company?
STEP 3

• Three Key Questions to Ask Yourself
• Will I need to raise funding?
• Should I incorporate the business?
• If so, which type of entity should I choose?

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Should You Incorporate?
STEP 3

• Incorporation has many benefits. The three most
  important are
• Reduction in personal liability
• Tax advantages (pay taxes on net income not gross
  income)
• Prospects, suppliers, and investors will think
  youre for real

If you intend to take your business seriously,
get incorporated.
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What type of entity?
STEP 3

• Ask an attorney for advice on whether you should
  form an LLC, S corporation, or C corporation and
  what state to form it in.
• Some rules of thumb based on my experience
• An S corporation is good for a smaller business
  and has some tax advantages, especially if you
  intend to be a lifestyle business.
• However, if you want to raise investment
  capital, be taken seriously by venture
  capitalists, or ever sell your company, it will
  likely benefit you to be a C corporation.
• As far as location goes, Delaware is the most
  common state to incorporate a business in if you
  plan on starting a business that will be seeking
  investment or ever plans to go public or be
  acquired. If you plan on starting something
  smaller, your home state is usually fine.
• If you are starting a company with just yourself
  and money is an issue, you may wish to use an
  online service like incorporate.com. The cost is
  about 250.
• If you are starting a company with multiple
  founders or one in which you plan to raise
  investment for, use a law firm. The cost is
  around 2500 but it will be worth it.

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Raising Funding Debt vs. Equity
STEP 4
The first step is to determine if you will need
outside money to get your business going. If you
do, you have to determine how much is needed and
decide whether to seek debt financing or equity
financing. With debt financing, your company is
loaned money that it will have to pay back over
time with interest. Main sources are family and
friends, your own contacts, and the bank. If you
qualify, the SBA can be a big help with
loans. With equity financing, your company is
given money it will not have to pay back in
exchange for percentage ownership in your company.
Calculating ownership percentages
Current value of company (Pre-Money Valuation) 40,000
Investment Amount 10,000
You Own After Investment 80
Investor Owns After Investment 20
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Where to Get the Money
STEP 4
If youre looking for
If youre looking for Youll most likely get it from
1,000 to 25,000 Friends, family, your contacts, bank loans
25,000 to 250,000 Angel investors, bank in some cases
250,000 to 1 Million Group of angel investors
1 Million Venture capital firms
A Tip on Raising VC Whats the most important
thing I can tell you about raising venture
capital? A. Dont send in an unreferred plan!
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Sections of a Business Plan
STEP 4

• If youre looking for any substantial amount of
  money, youll need a business plan. Here are the
  sections that would be in a usual business plan
• EXECUTIVE SUMMARY
• THE PRODUCT OR SERVICE
• BUSINESS STRATEGY
• USE OF FUNDS
• MARKET OVERVIEW
• MARKETING PLAN
• CHALLENGES RISKS
• THE TEAM
• COMPANY PERFORMANCE TO DATE
• APPENDIX A REVENUE, PROFIT, BREAKEVEN
  PROJECTIONS
• APPENDIX B - MONTHLY BUDGET FOR NEXT 12 MONTHS
• APPENDIX C QUARTERLY BUDGET 3 YEARS OUT

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Bootstrapping Growing Organically
STEP 4
It is certainly possible to create a successful
company without any initial investment other than
time and energy. This is often the only option
available to young entrepreneurs. Heres what you
can expect if you go this route.

1. Be prepared to work 60 hour weeks for a year or
   more without any salary.
2. Be prepared to wear multiple hats including CEO,
   CFO, COO, VP Marketing, VP Business Development,
   and Chief Executive Janitor
3. Be prepared to offer ownership in your company
   (equity) to purchase the intellectual property
   rights to the product you want to sell if needed.
4. Be prepared to offer ownership in your company to
   other team members until you can pay them a
   market salary
5. Be able to look at creative ways at getting legal
   and accounting advisors to provided discounted
   help including offering them a small piece of the
   pie.

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Market Positioning
STEP 5

• To develop your marketing and positioning
  strategy, ask the following questions
• What is my unique selling proposition? What will
  make my product so different that customers will
  buy it rather than competing products?
• What do I want my brand to stand for?
• Do I want to have a low price, competitive price,
  or high price strategy?

Common methods of differentiation include a lower
price, better service, easier to use, a new
feature, a new technology, or a better business
model.
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Marketing Sales Strategy
STEP 6

• It doesnt matter how good your product or
  service is if no one knows about it.
• To get started on your marketing and sales plan,
  ask yourself these questions
• How will the product be sold? In a retail store,
  online, by direct mail, by catalogs, by
  infomercials, through distributors, or by a
  combination?
• Will you sell your product at wholesale, at
  retail, or both?
• Is your main market businesses or consumers?
• Where do customers go to look for the product?
• How can we be positioned so that were in these
  places?
• Could the price point support a telesales force?
• Could the price point support a direct sales
  force?

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Building a Web Positioning Strategy
STEP 6
Selling a product online can be a great way to
reduce costs and have your product exposed to a
large market. Start by building your web site,
getting a merchant account, and getting a
shopping cart or order form running. In terms of
positioning your company and product online,
there are four areas to look at
1. Search engine marketing 2. Email marketing 3.
Affiliate marketing 4. CPC/CPM advertising
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Building Your Team
STEP 7

• Initially, it might just be you or you and a
  partner. As your company grows, youll need to
  hire staff to help you. If you never hire anyone
  youll be doing all the work yourself and be
  creating a job rather than a business.
• I look for three things when evaluating
  candidates
• Experience in the related areas
• Communication skills
• Ability to take initiative

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Broadwicks Current Org Chart
STEP 7
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Becoming a Manager
STEP 8
Once you have employees, you will have to learn
how to manage them. Here are some tips.

1. Have a Vision and Communicate It.
2. Show Respect.
3. Share Your Success.
4. Dont Be Too Serious.
5. Work With Your Employees.
6. Have Your Door Open.
7. Listen.
8. Build Relationships.
9. Commend More Than You Criticize.
10. Reward With Praise as Well as Salary.

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Building Systems
STEP 9

• Investors invest in systems. Just as a human body
  is made up of a number of different systems, so
  is a healthy business. You will need to put in
  place systems in the following areas
• Human Resources
• Billing
• Marketing
• Product Development
• Employee Training
• Accounting
• But what are systems? They are just formalized
  rules, policies, and procedures that trained
  individuals are able to repeat time and time
  again as your company expands.
• Key Question Will your business be able to make
  money while you sleep? All highly successful
  businesses do.

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Scaling the Model
STEP 10
Once youve found a business and sales model that
works, think about how you can scale it. If
youve been able to build your company to this
point without outside capital, now may be a good
time to get some outside capital and put your
foot on the accelerator. Ways to Scale

1. Set up sales offices in other areas and expand
   the business in those locations.
2. Either find partners or set up new offices
   overseas.
3. Considering franchising your business if
   applicable.
4. Bring on better talent that may have additional
   knowledge on how to open up new routes to market.
5. Expand spending on advertising efforts that have
   shown to be effective.

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Wheres the Exit?
If youve been able to create a successful
company with paying customers, an in-demand
product, an experienced team, and solid systems
youll be well on the road to reaching the 1
million mark in sales. Although this is a worthy
goal, the end goal for many is an exit event
which may take quite a few years longer to reach.

• A company can exit in just four ways
• Get bought by the general public by having an
  initial public offering
• Get bought by or merge with another company
• Have an orderly shutdown in which all creditors
  employees are paid
• Go bankrupt

For many entrepreneurs with high potential
businesses, being acquired or going public is the
end goal. It generally takes at least five years
to reach this point, although the time can be
less in certain situations.
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Principles for Entrepreneurial Success

1. Have a Bias Toward Action
2. Dont Be Afraid of Failure or Mistakes
3. Work Your Butt Off, But Keep a Balance
4. Write Goals Down Follow Up Monthly
5. Know Why Youre Doing It

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Why Im Doing It

• Why Do I Do It? Five reasons
• I love the game.
• I like being able to provide jobs.
• I enjoy being part of a team that is creating a
  product used by over 3100 customers.
• I like the concept of being financially free and
  the benefits that come along with having money.

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Reason 4
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Why Im Doing It

• Why Do I Do It? Five reasons
• I love the game.
• I like being able to provide jobs.
• I enjoy being part of a team that is creating a
  product used by over 3100 customers.
• I like the concept of being financially free and
  the benefits that come along with having money.
• Im passionate about working toward reducing
  poverty in developing nations and feel
  entrepreneurship is the best way I can earn a lot
  of money so I can give back later.
• What will be your motivation?

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Some Final Words of Advice

1. Being an entrepreneur is not for everybody. But
   if you find it for you, and you can find a way to
   succeed, it is extremely rewarding.
2. If you presently do not have the financial
   resources, the experience, or a good business
   idea, intern at or get a job at a company in an
   industry you are interested in and start building
   your network and gaining experience.
3. Always focus on building relationships and
   expanding your network. Remember that its half
   what you know and half who you know.
4. Dont be afraid of failure or mistakes.
5. Get out there and do it. Take the initiative and
   have a bias toward action. Get experience however
   you can, have confidence, and be in it to win.
6. Write down your goals and frame them. Aim high.
   Follow-up monthly.
7. Get started today.

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For More Information
For more information visit Personal Web Site
Blog www.ryanallis.com Entrepreneurship
Resource www.zeromillion.com My
companies Broadwick www.broadwick.com Virante
www.virante.com
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Recommended Books

• New Venture Creation by Jeffrey Timmons
• Zero to IPO by David Smith
• Rich Dad Poor Dad by Robert Kiyosaki
• Rich Dads Guide to Investing by Robert Kiyosaki
• The Tipping Point by Malcolm Gladwell
• The Idea Virus by Seth Godin
• The Anatomy of Buzz by Emanuel Rosen
• Think and Grow Rich by Napoleon Hill
• The Seven Habits of Highly Effective People by
  Stephen Covey
• How to Win Friends Influence People by Dale
  Carnegie
• The Lexus and the Olive Tree by Thomas Freidman
• Reinventing the Bazaar by John McMillan
• The Commanding Heights by Daniel Yergin

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