Entrepreneurs’ Questions Offer Insights into Business
By Ray Smilor, Beyster Institute Executive Director

I really enjoy interacting with entrepreneurs – the excellent questions they ask show a never-ending desire to learn and to make the best decisions for their companies. Over the past couple of weeks, I’ve received several questions from entrepreneurs and thought that I’d share my responses with you.

1. Entrepreneurs' budgets are limited. Is there any business process or function that entrepreneurs cannot afford to ignore when launching their own business?
   
   Focus on cash flow. Don't get fooled by the projections in your business plan. An entrepreneur needs to survive one week to the next, and to do that, understanding and maximizing cash flow is essential.
   
   
2. Often entrepreneurs are told to hire the best people they can afford, but what if they cannot afford anyone?
   
   Two suggestions. First, think of compensation differently. Find out what someone really wants (more freedom, chance to be closer to home, ability to work on an interesting project, future rewards, etc.), then focus on that in trying to hire someone. An entrepreneur could pay himself or herself less to get the right person, or offer stock options, or provide a better culture in which to work. Second, if you can't get a person, try to get an organization. "Free or better" is a good motto for an entrepreneur. As part of bootstrapping, try to find a law firm, or marketing firm, or financial services firm that will provide pro bono assistance.
   
   
3. Many small companies and large companies alike hire subcontractors to supplement or substitute for their work force. What kind of process do you recommend that entrepreneurs use when hiring contractors? What can entrepreneurs do to protect themselves and ensure that jobs get done?
   
   Do some due diligence first on subcontractors. Get references and speak with their customers. Then assign someone to monitor what the sub does on a regular basis – weekly calls, setting milestones, carefully reviewing invoices to make sure charges are legitimate. Put an escape clause in any agreement, and have other subs in mind in case you might need to go to them.
   
   
4. Do you recommend that entrepreneurs not hire or partner with their friends?
   
   If you hire a friend as a partner, put everything in writing up front when everyone is happy. Indicate who can make a final decision, what each person's responsibilities and expectations will be, and how the partnership will be dissolved if it comes to that. Get outside help or a third party to ask "what if" questions that can be addressed right at the start.
   
   
5. How do you know when you've done enough research?
   
   Test what the research seems to be telling you. Realize that no matter how much information you gather, it will never be complete. There are always uncertainties. So go to the market, talk to customers, get feedback on your product or service. Business is not a game of perfection. We have to act on imperfect information all the time and then adjust accordingly.
   
   
6. Today, is it critical for new businesses to have their own Web site?
   
   Yes. The Web site is not just an information tool; it's a marketing tool that can also help build credibility.
   
   
7. What are some of the most common and least expected problems new entrepreneurs encounter and how can they avoid them?
   
   The 1% Myth – believing that all one needs is 1% of a huge market to succeed. Understand market segmentation.

   The Better Mousetrap Myth – believing that if you build a better mousetrap the world will beat a path to your door. It never does. You have to beat a path to the market.

   The Everyone-will-buy Myth – no product or service is bought by everyone no matter how good it is. Develop your customer profile and really understand what your customers want and need.
   

8. What's the best way to get useful advice without paying a lot of money?
   
   Look for a mentor who is willing to spend time with you or set up a personal advisory board of people you respect. Then, when key decisions come up, use your mentor or advisory board to make as wise a decision as possible. As an alternate, read good books. For example, look for a new book by J. Robert Beyster and Peter Economy called “The SAIC Solution: How We Built an $8 Billion Employee-Owned Technology Company. " The book provides great insights on starting and building a successful company.

©2007 The Beyster Institute and its authors and their entities. All rights reserved.

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