Business RX: Advice on improving or starting a business

Jan 22, 2013

Elana Fine, managing director of the Dingman Center for Entrepreneurship at the University of Maryland's Robert H. Smith School of Business, will take your questions.

Do you think that a chain of drive-through, healthy fast food restaurants would prosper in today's market? I know that there is a trend for diets/healthy eating, but there doesn't seem to be any major chain known for its fast food being completely good for you.

This has proven to be a very tough market to crack.  It turns out it is actually a very small part of our population that demands healthy fast food options. We are actually seeing the opposite - burger chains and cupcakes exploding.  Subway might be a good model to try to imitate -- they took something standard like a sub and pitched it as a healthy choice.  What else requires limited behavior change but is significantly healthier than a Big Mac?

Why are the links to the Live Q&A's often for the previous day (or last week) instead of the current day. It seems like this should be an automated task.

Hello- Chat producer Sarah here.  Can you tell us where on the site you are seeing these outdated links? I can try to help get them corrected.

Hi Elana, I have a great idea for a small business that would allow me to do something fun while filling a void in local services. I've seen examples of the business elsewhere and am confident that I could make a go of it. That being said, I'm a fed who is slowly paying down my law school debt while saving for a house and starting a family. How do you advise people to deal with the insecurity of giving up a steady paycheck and benefits?

This is often the hardest obstacle in getting started -- the unknowns and uncertainty.  A lot of  times entrepreneurs are the only ones who think their idea has legs, so it is sometimes hard to build support and justification for leaving a job.  You need to back your idea with data on market needs - look closely at those examples and understand the startup costs and runway needed to fund the business.  You will need to max out your credit cards and sacrifice some savings.  If you don't believe in the idea or your ability to execute, then hold off. The first people you need to sell to are the ones who will help support you! Start pitching them the same way you would pitch a customer.   

I think that one of the reasons that I continue to work for someone else is that I know I don't have all of the skills needed to run a business by myself. I need a partner who could take the lead on sales while I take the lead on other aspects of the business. I don't really feel that I want to be in business with any of my current co-workers, so how do I find a like-minded partner for a new business?

You are smart to understand your skill set and where you might need help.  I'd suggest a couple avenues.  First, find industry networking opportunities where you might find others with similar interests, yet complementary skills sets.  Second, look for resources, such as the local startup Co-Founders Lab that is working with entrepreneurs to find co-founders.  Third, you can always recruit in the way a larger corporation or late stage startup would - look for successful companies in the sector and try to hire their executives. You might find there are others itching to do something new. 

It seems like there are tons of reality tv series about offbeat jobs, storage locker auctions, pickers, shippers, restoration, mining for gold, etc. Whenever I watch these shows, I always think these people are making less money than the show says. I don't see how any of these could provide someone with a stable income of $2-300/day or $1000/week or $50k/year after expenses. Yet, it seems like people watch these shows and think, "I could do that."

If it is too good to be true, it probably isn't true.  You are smart to be doing back-of-the-envelope calculations before jumping on the storage locker bandwagon.  Like anything, you have to be able to scale the business to generate a significant return.  Have these companies really identified a large market opportunity, or are these really just offbeat jobs that make for good TV?

Hi Elana, I recently read that VCs are investing more in the entrepreneur and less in the business. I am used to selling my business idea in the pitch and focusing mainly on that. Do you have any tips on how I can better pitch myself and my team as entrepreneurs? What do VCs look for in an entrepreneur they want to invest in?

I'd probably tweak that statement a bit to say that it isn't just the idea, but the ability to execute.  So, while the idea and the business is important, the real differentiator is the entrepreneur's plan for growing the business.  VCs are looking for unique business models and monetization strategies rather than repeats of past successes.  An entrepreneur can't walk in and say they are going to start a mobile app company that will generate revenue through downloads and ads -- that has been done and they want to hear something different.  It is the entrepreneur who needs to sell them on how they see things differently. 

I'd like to start a business to help people with personal finance like investing for retirement, saving for college, debt management, etc. If it's a storefront business, people would see it and that makes marketing easier. But most businesses like this are in office parks where people aren't likely to see it by passing by. How do I decide how to market the business? Write articles for publications, advertise in local papers or online? There are so many avenues. Or should I just work with a marketing professional? Thank you.

These kind of services businesses don't typically require a high priced storefront location because it is less likely people will be hoping to walk by a personal finance company like they would a coffee shop.  Storefronts have high fixed costs, making it hard for a services business that may have more variable revenue streams.  You are smart to consult a marketing professional, but from a startup perspective, you should look at other companies on the market like HelloWallet, Mint.com and others that are building Web-based, scalable offerings in this market.  There is a void in the market for these services beyond the wealthier demographics-- but you are right that it is very hard to find and educate your target market.  

I have a full-time job as a Web developer and often think that I could jump ship and become a freelance developer. There are thousands of small businesses that could benefit from a new or improved website and social media presence. However, I also know that when someone sends me an unsolicited email offering a service, I almost always ignore it. How does someone start offering a service without having their offers rejected without being heard?

There is a huge void in the local market for development talent. I wouldn't suggest sending unsolicited emails, but you could make a name for yourself quickly by taking on some small projects for local startups (even if for equity at first).  The community is close knit and likely to make referrals if you do a good job.  Announce yourself at a D.C. Tech Meetup or local FB groups or other events and you might be on your way... 

I recently read that one of the biggest mistakes a startup can make is asking for too much money. How can entrepreneurs zero in on the right amount of funding to ask for? Should you ask for the amount that you need or the average amount a particular firm usually invests?

It is a delicate balance to find the right amount, but it does lend to your credibility as an entrepreneur.  Each company has different funding requirements, so I wouldn't go for an average.  You need to target the firms based on whether they write checks in the range you need.  If you need $10M, don't go to a VC that focuses on $3-$5M.  I'd make two recommendations. First, you need a solid financial model that credibly factors in R&D, sales and marketing and other expenses (low on salaries!). Once you figure out the best case, figure out the worst case and plan for that scenario. Also think about how you can raise money in tranches, received the 2nd tranche after you have hit some performance milestones.  Second, make sure you are approaching VCs that invest in your sector, stage and $ amounts. Don't waste your time if there is not a good fit. 

What is your opinion on using crowdfunding platforms such as Smallknot and Kickstarter as a way to fund small businesses? Is there anything small business owners should be mindful of?

I think Kickstarter and others are a viable alternative for manufacturing new products, but I'd suggest learning the ropes before engaging.  Each platform has its own limitations and learning curve.  You could spend a lot of time on Kickstarter, but then never reach your goal. I'd pursue other funding alternatives.  You need to be thinking about your next move after you fund the initial project - what will you do next to build a business? How will you fund?

How important are responsibility waivers these days (i.e. If you die, your family won't sue us)? While it seems necessary for many businesses, legal writing can sometimes get pricey for a startup, and it seems that in courts of law, these waivers get tossed aside right off the bat anyway. While a formality, are these even worth the time and documentation anymore?

I don't want to give you a legal opinion, but probably can't hurt to check the box on these kind of waivers.  You always need to have a good lawyer when you are starting a company -- you just never know what will happen and you want to have someone with experience.  For all my lawyer friends, you are welcome.  

It seems that in today's economy, businesses are being forced to cut corners to cut costs. Product quality and safety are both at risk. Recent reports say that Subway can't even make their footlong a full 12 inches long. Can we take this any more?

I'd hope that as our economy regains steam, our businesses will refocus on developing high quality products.  Our technology needs to continue to evolve to enable high productivity rather than just cost cutting. As the price of manufacturing rises in places like China and the U.S. reshores, there might be an opportunity to rebrand ourselves. 

I was interested in starting or joining up with a freelancing start-up that focuses primarily on recruiting multi-faceted government and former government analysts. Do you see a demand for joining or starting such a business enterprise?

Even with expected cuts in federal spending, the government will always be the country's largest buyer.  The private sector would be smart to recruit employees with federal expertise, particularly here in D.C. where so many companies sell to federal agencies.  Like any startup, you'll have to communicate how your methodology for identifying talent will differ from existing recruiters. 

In This Chat
Elana Fine
Elana Fine was appointed Managing Director of the Dingman Center in July 2012, after joining the team in 2010 as Director of Venture Investments. As Managing Director, Elana's primary focus is leading the Dingman Center in support of its mission and strategic plan. Key responsibilities include oversight of our student venture incubator, Dingman Center Angels investor network, business competitions, and technology commercialization efforts. Elana earned an MBA in Finance and Accounting from the University of Chicago's Booth School of Business in 2002, and earned a BS in Finance, from the University of Maryland, College Park, in 1997.
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