Startup Company | David Chan

Small Business Tips for the Neophyte

I have plenty of small business tips for the neophyte who is just starting out. Over my career I’ve probably started a dozen or so small businesses. Of course, not all of them have been successful, but I’ve learned a great deal about what to do and what to avoid. Probably the most important lesson that I’ve learned, though, is to not get too far ahead of yourself. There’s nothing wrong with thinking big, but every million dollar home run started with a lot of strikes and lucky singles.

The best small business tips come from careful planning. What do I mean by this? I don’t necessarily mean writing detailed business plans and complex spreadsheets, but really understanding the market you’re trying to address. How large is the market? Who are your competitors? Where can you find customers? I find it funny when people tell me of their next great idea and say that there’s no competition out there for their product. To me, that’s a bad sign. No competition could very well also mean nobody wants your product or service.

So, careful planning involves researching the viability and desirability of your product or service. The great news is that with the Internet, you’re able to dig pretty deep to find answers to your questions. For example, very few people realize the power that is at their fingertips with Google’s search engine and its advanced search options. In addition, Google has several tools that allow one to see “trends” and anticipate what people might be interested in. This tool is found at www.google.com/trends.

Other small business tips related to planning are creating proformas. A proforma is essentially a listing of all your sources of income and your expenses. This is where most small businesses fail. They (and I count myself in this category at times) put their rose colored glasses on and think that “all is good.” I’m going to sell TONS of this stuff and get rich. But, the devil is in the details. For example, how long will it be before you get paid? Do you have to extend credit or cash before you get paid? If you’re not paid for 30 days and you have to pay to get product immediately, you could have a cash flow problem.

A proforma does not have to be complex. In fact, the simpler, the better. As your company matures, it can get more sophisticated, of course, to keep up with the dynamics of your business. The most important small business tip here is to really look at and manage your expenses.

I was with a small startup company in the Valley that raised an astronomical $100 Million, while I was with them. Within a few years or so, the company had less than a tenth of that amount left. The reason? Virtually no sales, high payroll and expensive offices.

Whatever can go wrong, will go wrong! Have you ever heard of that phrase? My advice is to always have a contingency plan. If this product or service doesn’t fly, do I have enough cash to try another approach or how can I jettison a bad idea for another?

There are many more small business tips that I’ll share in the next article, especially as they relate to small business tools that will save you money.

Read more articles from David Chan

Why Alliances Are Important To Small Companies

Alliances are relationships created between companies to achieve an agreed upon goal. The goal could be to penetrate a country or industry together. It could also be to drive a new product line that was jointly developed. Or, the goal could simply be to complement each other in areas where the other is not as strong.

There are many reasons to develop alliances with other companies. The net result of developing an alliance is to pool resources. This is especially critical if you’re a small company with monetary or geographic limitations. For example, for a small startup company in Silicon Valley, your workforce might be limited to a handful of people and you also might be on a very tight budget. But, your product line might hold great possibilities to be sold in an emerging country, such as Vietnam or Cambodia.

In this example, a company may decide to enter an emerging company by selecting an alliance company that has what they lack. For example, language and geographic presence are obvious reasons to create an alliance. Other reasons could include a large, well-trained work force and rolodex of clients in your prime target area.

Just as importantly, though, is whether the alliance partner can train and support the clients in this geographic region. In fact, this is probably the most important aspect which needs to be addressed up front. While working for Oracle in Asia Pacific, I was tasked to find the build the right alliances in the multiple countries which we served. The upshot of finding strong alliance partners with both training and support expertise is that we spent less time supporting them directly, which translates into less direct costs.

A small company benefits from working with a larger company by leveraging the brand and market reach of the larger company. Using the same example above, Oracle developed alliances with hundreds, if not thousands of small companies, often in the area of systems integration work. The small systems integration company benefitted through association with a brand name like Oracle and the marketing prowess for which Oracle was known.

Strategic alliances are also very important to the success of a small company. Back in early 2000, I was at a hot, but small mobile startup company, called Everypath. At the time we only had 20 employees. Who would want to work with such a puny company? As VP of Biz Dev, I was tasked with signing up strategic partners. Strategic was the key word. Which companies out there would find our technology so compelling that they would build a business practice around our technology.

We proceeded to sign up some of the most prestigious companies, including Accenture, Cap Gemini Ernst and Young, Sun Microsystems, and Hewlett Packard. Not only did these alliances align strategically with us, we also received $20 million in venture capital and financing. This influx of strategic partners was the impetus to drive our company to next level of fund raising to the tune of $100 million. These same alliance partners also worked to drive market awareness and clients for this little 20 person company.

As you can see, alliances can be the catalyst that jumpstarts a company’s market awareness and revenue, if positioned strategically.