Business RX: Advice on improving or starting a business

Aug 08, 2012

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.

Hello, everyone! Elana Fine is joining us to answer your questions about starting a business or giving a boost to the one you've already got going. 


And here's this week's installment of our Business RX feature:  Should this company consider partnerships as it aims to build the 'HBO of games'?

Greetings, I have an idea for a specific niche service market to build online/mobile. I need to develop potential revenue projections, such as some advertising (one stream, not relying solely on this), e-books, content, lead generation. While I am realistic (not 'make millions online today!!'), I still want to be optimistic for a 3-5 year time frame. Given that experts observe that we are still in early stages for 're-imagining businesses' (see Mary Meeker's 2012 state of the Internet presentation). Could you provide some advice for a framework, so I can develop projection ideas/assumptions that I can share with mentors/advisors to show my determination? Thanks.

You are smart to be thinking about creating revenue projections. We speak to a lot of entrepreneurs who think it doesn't make sense to put together revenue projections early on when there is so much uncertainty.  The best framework is a bottoms up approach - identify your revenue streams and growth assumptions for each stream and show how they grow over time.  For example, if you are going win 2 customers in month one, 6 customers in month 8 and 20 customers in year two -- the projections should reflect that growth and revenue expectations per customer over time (or user, etc.) .  Top down, taking a large market and making assumptions about a % of that market you can capture usually leads to significantly inflated projections and doesn't show advisors or investors that you have given thought to how you will methodically grow your business. Also important to also think about the bottom line -- what are expenses associated with generating that revenue?  To quote one of my favorite lines from our angels this year "is the juice worth the squeeze?"

I am launching a new mobile app and will need additional capital (maybe $250K) to help complete the next stage of development. I think angel investors might be the right fit, but what is the best way to approach them and get their attention?

Angel investors might be a good way to get some initial capital -- there are a number of active angel groups including the Dingman Center Angels.  In the current environment, the best way to get funded for a mobile app is to show that you traction with users -- get a minimally viable product out there and show that you can reach your users and understand their need.  There are so many apps out there it hard to convince investors that you can break through the noise.

For those of us attending University of Maryland who are  interested in entrepreneurship but in a non-business major, what advice can you give? Would it be best to take an advertisement class? Marketing? Entrepreneurship? Or is it more about who you know than what you know?

Great to hear from fellow Terps.  There are a number of ways to get involved -- certainly through classes at both the Smith School and Clark School as well as through the iSeries classes.  Also stop by the Dingman Center on Fridays for Pitch Dingman and we can give you additional information.  The best way is to learn about entrepreneurship is to do it and there are a number of resources around campus to help. 

Hi Elana, A lot of buzz has been going around on the lean startup methodology being applied in technology and other industries. How do you think first time young entrepreneurs can get their hands on training on implementing such methodology to their business ideas?

There are a lot of local entrepreneurs who are following this methodology, many with a lot of success.  Although there a few groups around town who would be good resources -- the best way to learn about the process is to talk with startups to understand how they determined their minimally viable, launched and how they determined when/how to iterate.  As you launch your business "leanly" you have to also be thinking about the decision points to iterate less and grow more. 

All these people, you know and do you really even know them? When you get the training wheels off and solo you better know what you are doing.

Yes, sometimes being an entrepreneneur can be a lonely business.  Everyone can surround themselves with smart and experienced mentors and advisors, but no one will be more passionate about your business than you (not the first to say that).  That is often why investors like to invest in seasoned entreprenuers -- which is sometimes a chicken and egg problem.

Hello Elana, I'd like to start a interior design business. I believe in my talent, but I don't exactly have a portfolio full of projects that I can show to potential clients since I am fairly new at this. What is the best way to get my foot in the door and start establishing myself?

Hi - would you like to come start at my house? All kidding aside, figure out what kind of projects you can do in your spare time for family and friends for free that you can start using to build your portfolio.  Even if it is a small room here and there -- you can show those before and after shots that will convince others of your talents.  Good luck!

Hi Elana! Love your Rx chats every week in the Post - they are great. How can entrepreneurs get more involved in the local community? I would like to intereact with our start-ups on an informal basis but don't know where to turn?

Thank you, much appreciated.  I was pretty sure only my mom was reading. The DC tech community is thriving, with plenty of options for entrepreneurs looking to get connected.  Organizations like DC Tech Meetup and are providing great forums for entrepreneurs to meet.  There are also new incubators like The Fort and Acceleprise that bring in mentors to help with their companies. 

I am outraged about the "You Didn't Build That" comment. Do you think Obama hates small businesses?

I'm sure the OpEd sections of this paper would have more opinions on the topic.  No, no I do not think that.  I think the JOBS Act is testament to that. 

I've been working as a solo consultant to nonprofits. I've been courted by a consulting firm, which is attractive on one level (they handle billing, provide a training system for me to use with clients instead of me coming up with specialized trainings completely on my own, they will help market me). On another level, I have some concerns: I would still have to get my own clients, they want exclusivity (so I can't serve other clients on my own, without giving them a cut), and a non-compete (not only am I prohibited from pursuing their clients if I leave, but they get a portion of my earnings for a year after I leave - because they have trained me, blah, blah, blah). What advice do you have on weighing whether to remain solo or join a firm?

That is a really tough question and really depends on how important it is for you to have control over your company.   You may be able to generate more business by being able to leverage other infrastructure, but you do lose independence and flexibility when you join with others.  It sounds like you could probably continue with being a sole contractor and find other outsourced service providers to handle billing and training, without signing on with another firm.

What is the line between a hobby and a business? Is there a financial threshold that one must cross before having to deal with becoming a formal business? For example, if a friend knows I have my own personal Web site and offers to pay me to set one up for him, have I started a business?

I'm certainly not an accountant or tax specialist, but if someone pays you for a good or service you have provided that is technically a business.  A hobby would be if you like to set up web sites for friends for free.

That's all we have time for today.  Thanks for joining us!

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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