Business RX: Advice for entrepreneurs on how to improve or launch a startup

Mar 04, 2014

Liz Sara is an entrepreneur-in-residence at the Dingman Center for Entrepreneurship at the University of Maryland's Robert H. Smith School of Business. She's here to take your questions about securing funding, building your customer base, how the entrepreneurship landscape looks in this region, and more.

Hi Liz, I see you have a lot of PR/marketing experience. I have an early stage startup and have allocated very little for PR/marketing. Most is focused on sales. Any tips for how much I should be spending on traditional PR/marketing as an early stage startup?

You are in the same position as many startups--you need some marketing, but there isn't a lot of cash available.  There is no formula, unfortunately.  Much depends on how crowded the market is that you are in, how unique your product is, how expensive it is, how long the sales cycle is and many other factors.  You need to decide whether you need marketing to generate leads or to build awareness.  Both goals, while related, are different. So, I would start with a very specific, clear-cut goal. Then focus on specific marketing activities that will help you accomplish just that, instead of trying to do everything. For example, if you want leads, you should not be doing booths at trade shows.  If you want industry visibility, try a PR campaign that will get you earned media. 

We have a three person startup that is pre-revenue and would like to bring on investors. But how do we come up with a pre-money valuation?

In reality, the marketplace is going to determine what the valuation will be. I?ve seen pre-revenue companies with valuations ranging from $1M-$6M.  Do they all get funded?  Definitely not. There is always the tug of war between the entrepreneur that wants it higher; and the investor that wants it lower.  At the end of the day, you have to decide how badly you need the investment. And the investors have to decide how badly they want to be in your deal. 

My startup is picking up some steam and we're beginning to draw media attention. After one interview I've learned that I'm no media pro. Are there resources online or in the area for media training for founders?

You are savvy to recognize that getting some expert media training will help.  You are right. While it SEEMS easy enough to talk to reporters, we've all witnessed how things can go wrong -- fast.  How a seemingly innocent comment can backfire. Any of the local PR agencies -- large or small -- offer these types of training sessions for their clients. I would focus on the small boutique agencies, as the bigger the firm, the higher the price will be.  It will be money well-spent.

Hi--You are an advisor to many startups. I'm at the stage with my business where I want to pursue an advisor to take me to the next level. What is the appropriate role for an advisor? How should I formalize the relationship?

Advisors can play an excellent role for early stage companies.  Select advisors that offer experience that fills team gaps at a senior level. Do you need someone to help open doors to prospective companies in your target market?  Look for someone with a rolodex that is willing to do that.  Do you need someone that can help refine your pricing model, or come up with an entirely new one?  Find someone with a finance background that has done it many times.  So, start with deciding what type of assistance you would like to gain from advisors.  Then, look for people with that background.  Often, advisors get a small (very small) set of options as compensation. 

How can a small business compete against other small businesses that get preferential treatment from the federal government for being woman-, minority- or veteran-owned? It seems like I would be better partnering with a minority or veteran just to get better access to contracts, but that seems wrong.

There are definitely Federal Government Small Business Set-Asides for 8 (a), Disadvantaged, Veteran-owned and other categories.  This is the good news.  The not- so- good  news is that it is still very competitive to win these.  I think the best approach for a small contractor to get into the federal market is to partner and be a sub-contractor. Find other small businesses that have credentials and complementary experience that your company does not have. Discuss a teaming arrangement with them and prepare a proposal that includes both of your companies' expertise.  Often, agencies want vendors that have already worked in that agency. 

Hi Liz - In your opinion, what is the most important part of the investor pitch/story for angel investors? What do investors need to hear or see to make them comfortable with investing in my business? Thanks.

At the end of the day, investors really want to know if they are going to make money on the deal. It's very simple. We need to understand your business, buy into the fact that it is a money-making opportunity, we need to believe your pricing model, we need to see a clear path that you will take to build your pipeline and get customers, we need to believe that the founders can actually make it work, and we need to see a reasonable exit strategy somewhere down the road.  In other words, what company will buy your firm so we make money on our investment?  All too often, founders spend too much time in the pitch talking about the product. Focusing on these other issues really matters more.  

What happened to Elana Fine? Is she no longer a chatter? We miss her!

Oh don't worry...Elana is still around and still a chatter!  I'll be sure to let her know she is missed...

Hi Liz! I have a homemade jewelry business that I'd like to take beyond just local farmer and artisan markets. I have a Facebook page for my jewelry, but was wondering if you had any tips on getting my name and brand out there? There are a lot of jewelry businesses!

Yep. There sure are a lot of jewelry businesses. So, how do you differentiate yours?  What's different or interesting or fun or unique or cool or hot or whatever about your jewelry? And, who are you selling to?  Is it 18-25 year olds?  25-34 year olds?  Who?  Successful consumer companies are very specific in targeting their customers.  First, you need to clearly decide who is your audienc, and why would they like/want/buy your jewelry? Once you figure that out, THEN you can work on the various social media and other channels to reach that audience in the best way.  Otherwise, you might end up spending too much time or money or resources in the wrong places.

How should a startup enter the market ? If it enters with a fully-featured software so it can be very appealing with the least problems at its launch, it will be higher in cost and will delay entering the market. Or it could enter with a product that could have some problems but has the main features working in a relatively acceptable way. That could help test the market and get early feedback, but it may hurt the brand if it didn't meet expectations. How can we balance that ?

More and more companies are choosing to enter the market with SOME of the features of what might be a larger or more complex, robust product offering down the road.  The advantages of this approach far outweigh the negative.  It gets you in the game.  You are talking to real customers who are evaluating and using a real product now--not an idea or business outline that will not be ready for 12-18 months.  That immediate customer feedback will provide valuable insight as you spec and build the next set of features. And, as for the brand, you are actually building the brand, so the incremental enhancements are supporting a brand promise that you set out in the first place.  And, you aren't going to be reaching the entire target market at once...on day one.  Hopefully you are segmenting the market and as your product grows, so too does your marketplace expansion.

Hi Liz - I have a consumer Internet startup and I know that getting customers will be a land grab. We have some initial ideas about customer acquisition, but need someone with a marketing skill set. What is profile of a smart marketing hire for a early stage startup with little funding? Any creative ideas for how to pay new hires?

As a consumer business, you definitely want someone who has experience in THAT market.  It is completely different from marketing business-to-business products and services.  Unfortunately, this region is heavily geared to B2b and B2g companies and executives with related backgrounds.  Check out markets that have a big B2C focus--New York and Silicon Valley, for instance. You will find many executives there that could be of help as either full-time staff or consultants to your company.  As a startup with little or no cash, you'll have to be persuasive to get them to accept either deferred compensation or an equity stake or a combination of both. The hotter your company is, the easier this will be!

Hello Liz I'm at a crossroads in my career. I've been a software developer for the past 23 years. I still enjoy it but I'm concerned about the future. I've been doing research about the IT job market for those of us age 45+ and noticed a lot complaints about age discrimination. I'm ok for now but I'm looking ahead to the future. At my age I should be thinking about saving for retirement. I guess the question is should I look more into entrepreneurship ( which is risky) or fight to stay in corporate America ( for stability) to continue to save for retirement? Don't get me wrong, I understand there is no such a thing as more job security anymore. Thank you...

The culture in an early stage company is vastly different than that of corporate America. You need to decide whether that roller coaster ride is going to be appealing to you.  And by the way, it will be a wild ride.  Most of them never make it, even after getting outside capital.  There are too many things that can and do go wrong.  Are you willing to go through that culture shift?  You should talk to as many startup founders as you can.  There are many local Tech Cocktail meetups and other startup company confabs that take place all over town, all the time.  Hear first-hand from them what it's like in their companies and what that culture is all about. Maybe you can do some part-time work for one of them to get a real feel before you decide anything.

You know how you compete? By providing better services/products, being easy/pleasant to work with, by having integrity and showing professionalism, etc. In other words, all the ways you compete against ALL your competitors. Having a chip on your shoulder ain't gonna help.

Well said!  And a little luck and good timing ain't so bad too!

How much potential do you see for a custom cakes/baked good business? I know several people start selling without getting their names registered or obtaining the food licenses. They want to start small within friends and family to get the word out and test the market, before they invest in all the licenses and formal tax declarations. Is that a good idea for a home-based bakery business?

There's nothing wrong with starting small and starting from your kitchen!  Heck: we all know the stories of great businesses started in a garage.  But, with food, unlike software, there are FDA regulations and health code restrictions that you need to be aware of and follow.  I would suggest you speak to someone with this type of experience who will steer you the right way at the appropriate time.  

I've been growing my startup the past couple of years - it's fun and difficult. The best thing I did was join a BNI chapter - it's a great, supportive community and helps me not just get business but also focus my marketing/publicity energies.

A good idea and good for you for joining the BNI chapter.  I've heard good things from other people about that group as well.  Thanks for mentioning it today.

Wow, everyone...that was a firehose for me!  It was great -- and I loved the variety of questions...thanks for taking the time today...good luck to all of you!

In This Chat
Liz Sara
In 2001, Liz Sara founded Best Marketing to provide early stage software companies with strategic marketing, PR and business development services. Her company offers all the benefits of a full-scale, seasoned marketing department on a virtual. Since inception, she has helped more than 85 companies achieve their business goals. She is an adjunct marketing professor at the Smith School of Business at the University of Maryland. She served on the Board of Advisors at the Dingman Center of Entrepreneurship and is now an entrepreneur-in-residence there. She has served as a mentor at The Fort and is currently mentor at Acceleprise and Founders Institute.
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