Business RX: Advice on improving or starting a business

Dec 18, 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.

I am considering opening a soup and sandwich shop in D.C., however I've noticed recently a food truck craze in the area. Do you think the food truck model is a good choice for a start-up food service business or are food trucks just a fad? Thank you!

Food trucks are a good way to test the market and see if customers are attracted to your food concept.  Given the scarcity of great locations for new restaurants in the DC market, starting as a food truck will let you try out different locations around town.  You could identify two possible paths - one to start as a food truck and stay a food truck the other to use the truck as your test kitchen before making an investment in permanent space.  I really think you should figure out how to bring more food trucks to the University of Maryland! There is an untapped market. 

I have several friends who are unemployed or underemployed. They have taken on odd jobs including pet walking or painting, but nothing full time or regular. I know that in the past, people used to sell Avon, Tupperware, and other stuff for extra income. Are these still around or largely replaced by the Internet? Are there any good, work at home opportunities that will fit in the free time between jobs?

Despite the penetration of online sales, there is still a vibrant economy of direct sales organizations.  Traditional companies like Mary Kay still have a strong following and can produce significant returns for their power sellers.  Other newer companies, like Stella and Dot, have successfully leveraged this model for products like jewelry that people still prefer to buy in person.  Engaging with a direct sales organization might be a great way to generate extra income -- but also a lower-risk path to testing your entrepreneurial skills.  You are working with a known product, but it is up to you to get it to market and find new and repeat customers.  

What do you think the best business idea for a campus like U of M would be?

A business intelligence dashboard customized for universities. Like any large organization, universities have extremely complicated structures and need better tools to coordinate activities and determine success metrics.  Like CEOs and CFO's, Presidents and Deans need to be able to see a snapshot of their organization at any time.  

If I have an idea on starting a business that has potential global customers and multinational operations - what's your advice as to where I can find feedback and resources on my idea? Have you seen any early-stage companies successfully operate across country boarders?

Talk to a lot of people who have experience working in the markets you are targeting! Look for local public companies that have had succcess overseas (you can see revenue breakdown in their public filings) and talk to them about the challenges of particular regions.  Working internationally poses higher market and possible regulatory risks (and IP as well) but can also yield a higher return for cracking the code.  You could also look at global markets as opportunities to inexpensively test your product and work out bugs before expensively launching locally. We've worked with CirrusWorks, a local startup that decided to test their strategy in Asia before bringing to the states.  

How do you think outcome of the fiscal cliff will effect small business? What do you think the best solution is for the economy in general?

I like to think about it in reverse - what is the impact small business can have on the fiscal cliff (or economy in general)?  As we all know, the reality is that we need more jobs.  What if as part of re-tooling our workforce we focus on entrepreneurial skillsets? We have people dropping out of the workforce - imagine if they had the right skills and understanding of the process to start their own businesses? Right now, most people don't even know where to start if they have an idea.  We train our doctors and our lawyers - we need to be doing more to train our entrepreneurs.  

I'm retired now, but 35 or so years ago I had a small landscaping business. Over a couple of years I accumulated about $10,000 of unpaid client bills. Most of the bills were in the 200-500 range. I couldn't figure out how to keep working the business and go after the deadbeats - most were small claims court and it would have been impossible to work out a collection plan. Any advice for young people starting out who encounter this problem?

I'd encourage any small business owner to plan their business model around bad accounts the same way a large corporation would - expect a certain percentage will not pay.  You also need to be more proactive about vetting customers, requiring downpayments/pre-payments or credit card holds and flagging when your outstanding A/R is beyond what your business can handle.  The thrill of a new customer can sometimes blind entrepreneurs -- sometimes you need to vet your customers the same way they may vet you.  

My Mary Kay lady will bring my order to work, a kid's team practice, etc. This service (I order by text) is like magic! She adds samples also. I never go to a 'party' - that is old school. Hand-delivery rocks - good luck with your biz and consider this tip!

That is a great idea -- I'll have to look for her at my kid's next soccer game.  You raise a great point of using new delivery methods and technologies to revinvent older products or find new markets.  Netflix didn't invent DVDs - they just realized people would rather have them in their mailbox in a bright red envelope. 

You seem to be quite succesful -can you tell us a little bit about your background and what experiences have helped your career the most?

The biggest impact on my career was the time I spent as an early employee at  a startup technology-focused investment bank.  Our company advised a lot of early stage companies -- but we were a startup company ourselves answering the same questions as our clients.  How do we get new customers? What markets should we spent our time - sectors or geographies? How do we pitch ourselves vs. our competition? How will we make payroll? I benefited from learning a lot of lessons from our clients as well as from our firm's successes and mistakes.  

It seems that in the local shopping center we have had a series of restaurants come and go. Either the location is bad or the people running them just don't have the experience needed to be successful. My guess is more the second is true as there are one or two places that have been there since the very beginning and seem to be going strong. Why do people think it is so easy to start a business and be successful?

I think the biggest issue is that people confuse starting a business and running a business.  You may have the best chef and the best food - but if your staff is poorly trained, reservation system doesn't work or overpay for ingredients you will have a hard time in a crowded market. Restaurants often open too early and they don't spend the time to work out the kinks before making an impression on their customers.  Getting someone to try a new restaurant is easier than having them come back a 2nd time . 

How do I make a first strike in a solo P.R. firm? I don't know where to start - how to get a client with no (paid) portfolio for the Web site. (I hesitate to give away services to pad out my portfolio...)

There are two schools of thought - one, as you mentioned, is that you should never give away your product for free because you dilute your value. The other is that you need to seed the market and get experience.  What if you think of a freemium model for your PR services -- look for potential companies that aren't currently paying for PR support (maybe smaller non-profits) and then have them agree that they will start paying once you have shown some success (based on agreed upon metrics - social media, earned media,etc.).  You will get your foot in the door, have some references but also have some potential upside for doing good work. 

I'm a freelancer, and I find that I often waste time meeting with prospective clients that aren't viable. We have long meetings to discuss the potential project, but the project doesn't come to fruition for whatever reason. (Maybe it decreases in priority internally, deadlines don't work, etc.) I spend time creating a reasonable bid, but sometimes the reason the project falls through is they can't afford my fees. I've received advice to ask for their budget first to see about their ballpark idea on pricing, but they always say they don't have a budget. Perhaps not all this time is wasted. I can't expect every inquiry to lead to a project, but how to I manage my time so these failed prospects don't derail my schedule?

You are right, you do need to protect your time while also being open minded about potential customers.  a couple suggestions - 1.) You should have a product menu that categorizes your services by budget range.  You can send that to prospective clients in advance -- and confirm that option A, B or C is within the range they might spend.  Once you have set a range - the meetings and proposal will help determine client requirements and then determine which package is right fit.  2). Determine estimated value of customer. I'd say if they don't know the budget, then I'd also put a lower weight on the probability it will turn to work. Create a calculator for yourself - weight the probability of work and multiply by dollar value of work (based on organization size, what you think they want, etc.). Then determine a threshhold when you do/don't take a meeting.  If the expected value is going to be below $x, then don't take the meeting.  

My co-worker and I are want to start a new business. We've read books and Web sites on starting a new business, forming an LLC, etc., but I was wondering if there are any resources that you could point out that might help us as we begin the paperwork. There is so much information out there and at times, it feels a bit overwhelming!

There are free sites like LegalZoom that might give you a good start -- but it's also worth spending some time with a corporate lawyer to make sure you have all your ducks in a row.  You also want to make sure you are choosing the right legal structure for your business . Most VCs will not fund companies that are LLCs, so you might want to get advice on whether you are starting in right place.  

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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