Business RX: Advice on improving or starting a business

Aug 20, 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. This week, she is joined by special guest David Potts, founder and chief executive of e-Commerce software company SalesWarp. Together, Fine and Potts will offer advice on raising capital, luring customers, scaling a business, and any other entrepreneurship topics.

Are there specific industries you suggest for a mom who wants to start a business? Or any advice in general?

There are lots of great examples of moms as entrepreneurs in business. I think the first key is to make sure you have the passion and a real service to offer to your potential clients regardless of the industry. In retail, we see small women-owned businesses compete by redefining a niche market (such as fashion, health goods, kids' apparel) and getting creative with how they serve and retain the customer.

What is the best way for me to use the Dingman Center as a resource? What type of help do you offer for someone with a good idea?

The Dingman Center provides a great resource to learn, pitch and refine your plans. After every round of review, we've found a way to improve our message for both our customers and how to make it easier to understand for investors.

Hi. I am in the mid-stages of my career. I've been climbing the corporate ladder for a while with some success. Lately, I've been reading about how corporate entities want to hire those who think entrepreneurially. In fact, where I work I've heard our top management talk about it. To be honest with you, I'm not really sure how to act on it or develop the thinking. Can you recommend some good reads or blogs?

Although I've probably recommended the book 10 times on these chats, Eric Ries' "The Lean Startup" talks about entrepreneurship within existing corporations like Intuit and with startup ventures that are more typically thought of as "entrepreneurial."  Similar skills apply in both cases -- identifying a problem/solution, building a product on limited resources while testing hypotheses, establishing relationships with key partners and channels, etc.  We actually spend a lot of time talking with our MBA students about how to approach problem solving with an entrepreneurial mindset.

Where did you find help to start your business?

We started out in an incubator space, the Emerging Technology Center in Baltimore, where we found our first contacts in the industry and connected with the local tech scene. Highly recommend networking in an incubator space when you're getting started to meet the right folks and also evolve your plans.

Our second big boost was the Dingman Center and their experienced angel group who provided both mentoring and startup assistance.

I would like to start an online retail business for people hosting a party or entertaining (think products for cooking, decorations, home goods, servingware, etc.). What are the top three things I need to do to get started?

The first thing I would do is determine the existing players and how your business will be better, faster or cheaper.  There are a lot of existing online and bricks and mortar retailers in this space.  Pinterest has also created a large community for exchanging ideas on entertaining.  Second, I'd think about your target market (which goes hand in hand with your differentiation).  Is it young people just getting started entertaining or empty nesters that haven't thrown a party for years? Talk to these potential customers and figure out what they need. Next think through your monetization (and there will be way more than three things to do), and start figuring out how you will acquire these customers and how much it will cost vs. how much you will spend to get site up and running.

How is e-commerce impacting your customers?

For traditional retailers, e-commerce has been a tsunami that has forever changed the landscape of their eco-system. This has definitely impacted every retailer's sales opportunity, either positively and negatively depending on how equipped they are to manage the channels, competition and consumer preferences. In general, we see leading online retailers have 2-3 times as many technology investments today as they did just four years ago.

I have an early stage startup and I've had the same mentor from the beginning. We used to see eye-to-eye on most aspects of my business model. Lately, we've not been on the same page on an entire range of decisions. I'm ready to move on but the mentor isn't. How can I properly break up?

Well, as the song goes, "breaking up is hard to do." Mentor relationships are hard because they are a hybrid of personal and professional.  Most "professional-only" mentor relationships don't work.  However, in this case, you need to be very honest because you have a lot to lose.  Give the positive feedback of how valuable this person has been to your company, acknowledge the milestones you have made together, and then suggest that you change the structure of the relationship before things go sour.  That being said, make sure you are not just reacting to "the messenger" -- we engage with mentors because they have expertise and sometimes that expertise might be hard to swallow.

This question may be best for David. I'm not an entrepreneur, I haven't thought of a big idea. However, I want to work at a startup. I love being around at the beginning of things and the startup culture resonates with what I'm looking for in my career. What do founders look for when they're building their team?

From my view, we need mini-entrepreneurs at all levels of the team. Every person has to be able to create value through their ideas and execute plans without excessive oversight.


I'll add to David's response because we work with a lot of companies that are starting to grow their teams.  Often the founding team of a very early stage company is looking to fill a gap in their skill sets. Many technical founders do not have sales or marketing expertise, so they look for complementary talent. Each hire a startup makes is risky, so founders are looking for employees that add to their competitive advantage -whether it is industry expertise, connections or just passion and drive.

Are there any "tricks of the trade" you can pass along to selling in to large retailers?

Yes! We're learning every day on this topic. Part of selling a disruptive technology is understanding the part of system you're about to replace and the barriers involved.

"Innovation" and "Change" may be mandated by the market and from top management, but those words scare most IT departments.

 

Where do startups advertise openings? Are they using the major job boards like Dice, Monster, and the Washington Post or is it more informal since they aren't quite as well established?

I think a lot of startups depend on the usual suspects, as well as lower cost alternatives such as social media and community organization job boards.  Since hiring decisions often make or break a startup, founders often rely on qualified referrals from their own networks. I'd be remiss if I didn't also mention university career fairs and job sites!  There is a lot of strong talent at local universities that startups often forget to think about.

My co-founder and I are experiencing growing pains and we need help. We've been bootstrapping our startup for 18 months, spending all waking moments together. We have so much positive momentum right now but professionally we're not gelling as a team. David--did you experience anything like this?

Building the culture for your startup is a key part of growing your team. If your founders have difficulty working together, it's likely to cause major ripple effects through the team and be a big barrier to your growth.
Personally, I worked for a small public company that had very different ethics and culture than me personally and it was torture for us both. In hindsight, I wish I'd studied the culture much more before joining the team.

You have received investment from an impressive list of angel investors, any suggestions on how to keep investors engaged without having them involved in the day to day management of company? How do you find balance?

Most of our angels are part of our extended talent pool. Their investments are pivotal to our plans, but most importantly their advice is key as they help with planning, contacts and validation of many key business decisions.

The balance... I try to involve them as early as possible when issues occur and before making any key changes. Several of my active investors also help in coordinating with the group and saving the number of times I need to repeat the message individually.

Hi Elana. I'm sure you hear this often...my husband and his friends want to start a brew-pub. He wants to quit his job in order to do this. I want to be supportive of his aspirations; however, we rely on both of our incomes to pay the mortgage, bills, childcare, etc. Is it just me, or is this a bad idea? Is there a way I can be supportive of my husband although I feel like such a venture would negatively impact our ability to keep our house, etc.?

Well, I think CapBiz reported this week about how welcoming DC has been to new craft breweries...so at least your husband has wind in his favor.  Like any venture, your husband and his friend need to do their market research and understand the dynamics of the industry. You can overlook the financial impact -- it might just mean you need to bring on a few more partners so you can all share in the risk.  I've certainly heard worse ideas than a new brew pub -- but get more data before making decisions that will impact your family.  Also, find a way to do it where your husband can keep working.  Maybe look for recent grads with restaurant brewery experience or a junior partner who can live at home and stay on their parent's health care.  Thanks to Obamacare there are actually a lot of options for young entrepeneurs.

I know many friends that would love to have brew-pub. Might be a guy thing?

 

Elana's advice is key in these industries, do it with friends to defer the risk. I'd add, preferably wealthy friends who like beer more than profits for three to seven years. It's not a way to pay the mortgage near term and takes a lot of hustle to sell, even if the product is great. It's important to figure out how you'll cover expenses while any business starts out and its stressful for everyone involved. Like all startups, the rewards can be immense when he succeeds.

David - thanks for joining us for today's chat.  Congrats on your success with SalesWarp thus far. 

Enjoy the last few weeks of summer -- we'll be back next month.

Elana

Thanks Elana, look forward to catching up at the next Dingman event!

- David

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.
David Potts
David Potts is founder and chief executive of SalesWarp. His career includes roles as executive, senior manager and engineer at a number of high-tech companies, including: Founder and chief executive of 6th Street Commerce, an E-commerce solutions firm; senior vice president at SafeNet, a security software and hardware company; and director of wireless applications at Texas Instruments, the industry leader in smartphone hardware and software designs. David originally developed the SalesWarp eCommerce Management System in 2008 with the intention of helping retailers improve both sales and operating costs. Today, SalesWarp provides retailers with powerful integration tools to manage products, orders and customers while simplifying inventory and fulfillment operations across multiple sales channels and suppliers. David is a board member of the Greater Baltimore Technology Council and Mentor for the Emerging Technology Center Accelerator Business program.
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