Sell Your Business in Twelve Steps

Most Sellers place reasonable and prudent reliance on the expertise of others who have been through the business sale process before. The typical participants include an accountant, attorney and tax adviser (often the attorney or accountant doubles in the role of tax adviser). Other potential team members include a business valuation expert, investment banker or business broker.

In determining whether to use a business broker or investment banker, understand that either will ordinarily ask for a contract with a 180 day or more exclusive right to sell the business. Business brokers charge a fee usually as a percent of the purchase price. Ten percent is typical. Investment bankers usually charge lower percentage fees since the transactions they work on are larger. In exchange, the intermediary often prepares a presentation package for prospective buyers and assists in other aspects of the sale process.

Timing is everything in the sale of business. Planning and commitment helps the wise business Seller avoid the big three common mistakes that can thwart a successful sale -- Impatience, Indecision and Indiscretion (telling others [e.g. suppliers, customers and employees] too early or too late). Intelligent business owners offer the business for sale as part of a carefully thought out operational and marketing plan pursued ideally over a three to five-year period. Potential buyers for the business are targeted in advance. The business is put on the market at its peak valuation in a time of prosperity.

Planning and commitment maximize the potential for a successful sale. Without it, not only may the maximum sales price not be achieved, employee morale and efficiency, as well as customer and supplier relationships, may be unnecessarily disrupted. Commitment equals peace of mind. Without it, the business owner faces useless distraction and stress.

Answer to your satisfaction questions such as: Why do I want to sell the business? What will I do once I have sold the Company? Do I have a price in mind at which I would be willing to sell? How will my family and customers react to the sale of the Company? How do I feel about someone else running the business? What impact will new ownership have on my employees and the community it which it operates? Am I willing to offer a loan, take back paper or provide other financing to the new owner? Am I willing to continue in the employ of the new owner? On what terms?

Understand that what is being sold is a business opportunity. Potential buyers look at a business with an eye to the future. Sellers are often stuck on past performance. Equally important is for the Seller to have a realistic understanding of how valuable the business actually is. Dig in and thoroughly understand why someone would want to buy your business and what would increase the value of the business in the opinion of the buyer. Consider hiring a valuation expert. All of the foregoing should be undertaken with the aim of obtaining multiple, enthusiastic potential buyers for the business.

Many privately held businesses are operated in a manner to minimize the owner's tax liability. Unfortunately, these same operating techniques can work to minimize the value of a business. Although it is possible to reconstruct financial statements to reflect a different method of business operation, this process may also put the owner in the position of having to pay additional taxes with regard to prior years. This is one reason why advance planning is valuable. A track record of three to five years of maximum profits is preferable to restating the financials. If undertaken, the recasting of financials should be undertaken with the objective of showing what the business would have achieved if run like a public company in which earnings and profits are maximized.

Consider how selling or attempting to sell the business will affect basic operating issues and have a written plan for dealing with them. Relationships that can be disrupted include those involving key contracts, suppliers, customers, employees and competitors as well as activities such as product development.

It is often imperative to have a detailed plan for dealing with employee morale. Employees can be upset by change even if the Buyer will offer better terms and conditions of employment. Diverting an employee's energies to the sales process can negatively affect normal operations. Steps that can be taken to combat this include "stay" bonuses, accelerated vesting of options and other benefits and other retention programs.

The wise Seller puts herself in the shoes of the Buyer and properly prepares the business for sale, getting its house in order and handling potential problems in advance of sale. To the extent feasible, correct any weaknesses in the business, such as those due to existing or threatened litigation, contractual disputes, or other outstanding legal, tax, banking or financial issues that could slow down or complicate completing a deal. Possible obstacles to handle in advance include perfecting the ownership and registration of patents, copyrights, trademarks and other intellectual property rights; obtaining any consents that will be required to complete a transaction; settling lawsuits and claims; and environmental cleanup responsibilities.

Undertake a thorough review of the of the Company minute books, stock books and other corporate records and ensure that all are complete and up to date. Take any necessary corrective measures, such as adopting curative minutes. Similarly, make sure that all tax returns and other government filings, licenses and the like have been completed, filed and are current.

Anticipate other items that will likely be requested for review by a Buyer and prepare a strategy and plan for confidentially providing same. Often a staged disclosure plan is prepared, revealing more sensitive information only after the sale process progresses. Review a typical due diligence request checklist to understand what will be needed. Gather the required information, take any advisable remedial action and be ready to respond to the Buyer’s requests.

Sometimes a formal auction process is used to solicit offers, particularly if an investment banker has been engaged. In any event, the Seller ordinarily is called upon to evaluate the Buyer’s offer often set forth in a letter of intent. The LOI serves to outline the agreement of the parties on fundamental issues and commits the parties to an exclusive period of negotiations.

Price is the central bargaining issue in the transaction, but price cannot be understood without thinking about terms. Terms are often more important than price. It makes a big difference, for instance if a $10 million dollar offer is for stock or assets. The tax consequences for buyer and seller are significantly different depending on the choice. Better for the buyer because of a step up in basis, and worse for the Seller because of double taxation. Similar considerations apply to liability issues and the timing and type of payments to be made. For instance, asset deals leave the seller exposed to liabilities that are not assumed by the buyer. Stock deals require the buyer to assume the liabilities of the business. Installment payments are worth less than the same amount paid at closing. Payment in stock of the buyer brings its own set of valuation issues.

The Purchase and Sale Agreement can be a complex document. The major bargaining issues include: price; structure; seller’s representations and warranties; the conduct of the parties pending the closing; and conditions to the closing. In a sense, the entire negotiation process involves the apportionment of liabilities between buyer and seller. This process often is crystallized in a hotly contested negotiation of the agreement’s indemnity provisions. The parties must agree on who is to bear the risk of post-closing liabilities, both those that have been disclosed and those which are contingent or unknown. The seller wants to sleep at night. The buyer counters that the buyer is paying good money for a business that exists as the Seller has described. The buyer wants protection if the business turns out not to be as advertised. Resolution usually involves agreement on time limits for making claims and limits on the seller’s exposure for certain types of liabilities.

In addition to the buyer obtaining financing, there may be several other conditions to be met before the purchase is closed. Typical closing conditions include: satisfaction with the results of the due diligence investigation; receiving required opinions, approvals and consents; entry into ancillary contracts; and the absence of certain events such as threatening litigation. Typically, buyer and seller cooperate to satisfy the closing conditions in advance of an agreed upon closing date.

When the closing date arrives, and all of the conditions to the closing have been met, save those that will be satisfied at the closing, the parties and their representatives ordinarily assemble and lay out the paperwork. In neat piles on tables are found bills of sale, required consents, officer’s certificates, opinions of counsel, and other transfer memorabilia. After dealing with the inevitable last minute snafus, documents are signed, wire transfers are completed and the business changes hands.

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Characteristics of an Ideal Startup

"Here's a list of the top 25 characteristics of a great startup opportunity, as compiled by Sam Decker...

Defendable and differentiated
Competitive cost structure
Attractive partnership opportunities
Repeat customers
Word of mouth opportunity
Memorable product and name
Potential for PR
Attractive to be bought or merged
Scaleable staff and systems
Scaleable product -- build once, sell many times
Niche market or fragmented industry
High velocity and large market / industry
High perceived value
Product can be accessorized – revenue synergies
Healthy cash flow –> margin x velocity
Demonstrable felt need, demand – does it hit a primal chord?
Business can be measured for improvement
Can claim leadership
Sales model is scaleable and predictable
Product evokes emotion
Can make big wins – big customers
Limited exposure to legal issues
Own relationship with and information about customers

Read more in this post from SearchQuant.


Optimal Structure for Angel Investment

"What's the best/preferred structure of investment money pre-VC investment?... Assuming that you are planning on raising VC money some time in the future, there are two different typical structures for the first angel financing: (1) convertible debt and (2) preferred equity.

Convertible Debt: This is the easier approach of the two. In this case, the investment is in the form of a promissory note that converts into equity on the terms of a “qualified financing” (where qualified financing typically is defined by having a minimum amount – say $1m of total investment.)...

Preferred Equity: This is also known as a “light Series A” – it’s preferred stock that is similar to that a VC will get, but usually with lighter terms due to the relatively low valuation associated with it..."

Read more in this post from Brad Feld.


All About Franchising

Professor Cornwall provides links and commentary on a collection of material put together by Startup Journal and other sources. He expresses these additional considerations:

"Beyond the contractual issues that arise in franchising, there are some fundamental business and personal concerns that many franchisees experience after it is too late.

One of the biggest sources of frustration among franchisees is that they perceive that the value added they get from association with their franchisor diminishes over time.... Another concern expressed by franchisees is that with all of the rules and standardized procedures, they tend to feel more like an employee than a business owner...A financial risk to consider is that many first time entrepreneurs can only afford newer franchised concepts, since well established franchises can cost hundreds of thousands of dollars to buy in. These start-up franchisors can begin to experience their own growing pains. Some don't survive. In some cases they may take the franchisees down with them.

It is critical to understand all of the ins and outs of franchising as a general business strategy first. Then if the idea of a buying a franchise still makes sense, do your homework on the company and its concept. All franchise opportunities are not created equal."

Read more in this post from The Entrepreneurial Mind.

Squidoo : How to Buy a Business

I created a Squidoo lens on How to Buy a Business yesterday. Please check it out and let me know what you think of it, how it could be improved, what you make of Squidoo, etc. Thanks.


Free eBook on Entrepreneurship

"Author Bruce Judson has taken his book on starting your own business, Go It Alone to the WWW. And it’s free. From the intro:

Today, the conventional wisdom about how to start a substantial business is just plain wrong. Now, you don’t need to raise a lot of money first, you don’t need a team of employees, and you don’t need limitless financial resources. This book details how in today’s business environment it is easier, and more possible, than ever to build a significant business on your own with no employees."

Visit this post from Lifehacker for a link to the eBook.


Capital Stock Basics & VC Term Sheet Provisions

VC Experts has partnered with Wiley Finance, the publisher of The Handbook of Financing Growth, and excerpted the most relevant content on basic private equity and venture deal structures. This Buzz of the Week reviews capital stock structure of a company. "The authors give a real world example of how Liquidation Preferences affect pre- and post-money valuation, voting rights, and what happens to investors and management when there are multiple layers of financing. They also review registration rights, anti-dilution clauses and all standard term sheet provisions." The equity investment term sheet is particularly well covered, stating:

"In many respects the term sheet is where the most action occurs in the investment process. As the parties negotiate the terms of the deal, valuation of the company and the role of existing management in the ongoing entity will be carefully documented. Several concepts relating to valuation of the company are important to understand in the negotiating process. The impact of slight nuances in the words used to finalize the term sheet can have dramatic impacts on the amount of equity retained by the owners." Such terms include:

Premoney and Postmoney Valuation
Liquidation Preference
Voting Rights
Protective Provisions
Antidilution Provisions
Registration Rights
Board Composition
Employee Stock Options
Founder Share Vesting

The Four Agreements

don miguel ruiz's code for life

agreement 1

Be impeccable with your word - Speak with integrity. Say only what you mean. Avoid using the word to speak against yourself or to gossip about others. Use the power of your word in the direction of truth and love.

agreement 2

Don’t take anything personally - Nothing others do is because of you. What others say and do is a projection of their own reality, their own dream. When you are immune to the opinions and actions of others, you won’t be the victim of needless suffering.

agreement 3

Don’t make assumptions - Find the courage to ask questions and to express what you really want. Communicate with others as clearly as you can to avoid misunderstandings, sadness and drama. With just this one agreement, you can completely transform your life.

agreement 4

Always do your best - Your best is going to change from moment to moment; it will be different when you are healthy as opposed to sick. Under any circumstance, simply do your best, and you will avoid self-judgment, self-abuse and regret.

From this article from businessballs.com.


Cyberspace Law Revisited

"Ten years ago, David R. Johnson and David G. Post published in First Monday their influential paper on law and the Internet, “Law and Borders — The Rise of Law in Cyberspace.” Revisit “Law and Borders” and examine its impact ten years later" in this collection of articles from First Monday that includes:

Law and Borders: The Rise of Law in Cyberspace
by David R. Johnson and David G. Post (originally published in May 1996)

The Great Debate — Law in the Virtual World
by David G. Post and David R. Johnson

Virtual Borders: The Interdependence of Real and Virtual Worlds
by James Grimmelmann

Dispute Resolution Without Borders: Some Implications for the Emergence of Law in Cyberspace
by Ethan Katsh

The Life of the Law Online
by David R. Johnson

Found via this post from Diane Levin's Online Guide to Mediation.

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Simple Outline for a Business Plan

"A good business plan will define what your business is about, where you expect it to go in the future and how you will get there. The following outline the essentials of a good business plan.

1. Executive Summary...
2. Table of Contents...
3. Company Description...
4. Market Analysis...
5. Technology...
6. Business Operations or Manufacturing...
7. Management and Ownership...
8. Organization and Personnel...
9. Capital and Usage...
10. Financial {Projections]...
11. Appendices..."

Read more in this article from morebusiness.com.

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Global Trade Tutorial

Whether you're thinking about getting involved in international trade, or are already exporting, a review of the extensive materials in TradePort's Global Trade Tutorial will help you obtain a better understanding of how to succeed. The tutorial covers the following topics:

Getting Started
Researching Your Markets
Developing Export Strategy
Focusing on the Details
Understanding the Rules of Trade
Financing Your Exports

The site also contains a comprehensive Glossary of International Trade Terms that is well worth bookmarking.


How to Build Long Term Client Relationships

"There are many ways to keep customers for life, they include:

Deliver on your promises....
Treat your customers well....
Go beyond....
Pay more attention to your customers than your bottom line....
Nurture your employees....
Make attractive offers....
Guarantee your products and services....
Reward your customers....
Thank customers and keep in touch....
Return phone calls promptly
Be accessible to your clients
Be credible and become an expert in your field
Show empathy for customer problems
Have helpful customer service and support systems
Have a customer advisory panel for feedback
Never show indifference to your customers"

Read more in this Small Business Bible post found via this Small Business CEO post.


Ten Steps to Start Your Business

“Here they are—the 10 steps to starting your dream business...

Step 1: Create a Life Plan
Step 2: Choose a Business Model
Step 3: Create a Business Plan
Step 4: Select a Structure
Step 5: Create Key Assets
Step 6: Find the Funding
Step 7: Organize Logistics
Step 8: Find Great People
Step 9: Establish a Brand
Step 10: Market and Sell..."

Visit this Startup Nation webpage to read, listen, download and follow links to related resources.

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Data Protection Basics

"There are certain privacy and security rules that every business or organization should live by:

· Identify the sensitive information collected from customers...Keep this data only as long as needed. Block access or truncate display of it for anyone without a specific need to see it. Make your employees aware of what is sensitive.

· Data in transit are data at risk. Send only the data needed by the recipient. Truncate or encrypt all sensitive information. Establish appropriate data retention and destruction requirements...

· Screen all employees with access to sensitive information. Allow access only to what an employee needs to do his job. Monitor employee access to customer information...

· Include security requirements in every vendor contract. Interview your vendors’ security employees. Read the privacy policy of your vendors. Understand the legal requirements for offshore vendors.

· Overreact if you have a security breach...Hoping the problem goes away only ensures that it gets bigger.

· Learn from the marketplace. Don’t make commitments you can’t live up to...If your security practices aren’t changing, you aren’t keeping up with new risks..."

Read more in this DMNews.com article found via this Privacy and Security Law Blog post.

Business Plans Handbook

Here is an interesting collection of Business Plans that is part of a more comprehensive business information site: Reference For Business - Encyclopedia of Small Business, Business Biographies, Business Plans, and Encyclopedia of American Industries.


Advisory Board Advantages Raise Legal Issues

This excellent post by Ross Mayfield describes the benefits of an effective Board of Advisors (BoA), how to handle conflicts of interest and best practices for disclosure stating:

"I liken the role of a BoA as a group with strong ties to the company, playing a role in it's social network as the first degree. Initially, names alone provide credibility or thought leadership, but to really gain advantage, a structure such as above needs to ensure information flow and set expectations...Some of the benefits of a BoA:

Thought leadership
Technical advice
Strategic advice
Trusted feedback loop
Network into customers, partners and VCs
Increases the perception of scale and maturity
Properly disclosed influence through blogs and press
Cash-conservative compensation..."

Other good resources on advisory boards include this article by Auren Hoffman for Business Week and this post by Steven Bayle who points out, that when properly structured and managed, an advisory board can establish credibility in the marketplace and provide valuable assistance and advice on topics such as the company’s strategy, product offerings and technological direction.

As you might imagine, advisory boards raise legal issues. While the posts noted above touch on some of the legal issues involved in creating and serving on an advisory board, I would add the following, taken in part from this Tech Biz Florida article:

Advisory board members:

§ Do not have same statutory protections afforded to elected Boards of Directors
§ Do not vote as part of the Board of Directors.
§ Do do not have policy-making powers.
§ Are not officers or employees of the company.
§ Do not have management authority in the company.

If your company decides to establish an advisory board, it should do so in a way that minimizes any risk of liability for the advisory director. Steps that can be taken include:

§ A written description of the role and responsibility of advisory board members, which makes it clear that they have no policy-making powers, have no voting authority, and have no management authority in the company, but their role is solely advisory, subject to the review and approval of the company's Board of Directors and/or senior management.

§ Written records of the proceedings of advisory board meetings, which will reflect that the advisory board was acting consistent with the written description of its role in the company.

§ Review of the company's D&O Insurance policy to make certain that the advisory directors are sufficiently protected if a lawsuit is filed against them.

§ Review of the company's articles of incorporation and bylaws and local law to make certain that the company will be obligated to indemnify advisory directors to the full extent allowed by law, and consideration of separate indemnity agreements between the company and its advisory directors.


D&O Insurance Policies Primer

"Few companies or directors/officers review the precise wordings of their policies (whether they be D&O or products liability or property). By the time lawyers are involved in the claims side of things it may be too late. By investing the time upfront in scrutinizing the wording carefully, one can be best assured that the protection that is intended to be obtained through the purchase of a policy will be there when needed."

This comprehensive post from Insurance Scrawl explains the basics as follows:

"In general, insurance policies for directors and officers provide coverage for defense costs and liability payments (both judgments and settlements) for covered wrongful acts if a claim is made against the insured during the policy period. This is often referred to as “Side A” coverage. In addition, most policies afford coverage for the company’s own expenses incurred in indemnifying covered persons pursuant to the corporate indemnity in the company by-laws. This is often referred to as “Side B” coverage. Usually, there is a deductible that applies to claims within Side B coverage, and D&O policies typically seek to require that the company advance defense costs and make payment for any judgment or settlement before the insurance company will pay.

Coverage is triggered by the assertion of a claim against covered persons or the company during the policy period, but all claims relating to a particular factual circumstance (i) will be subject to a single per-claim policy limit and (ii) regardless when asserted, will be assigned to the policy period in which the first of any series of such claims was made. Typically, the covered persons and the company share a single policy limit for both the Side A and Side B coverage (defense and indemnity combined), though there here is one Side A-only policy and one Side B-only policy."

As to scrutinizing policy language, the post highlights the following sections as meriting close review:

Prior and Pending Exclusion.
Insured versus Insured Exclusion.
Pollution Exclusion.
Accounting of Profits.
Deliberate Fraud Exclusion.
Personal Profit Exclusion.
Presumptive Indemnification.
Defense and Settlement.
Allocation of Loss.
Underwriting Representations.
Claims Definition.
Defense Costs.
Interrelated Wrongful Acts.
Definition of Loss.
Financial Impairment.
Order of Payments.


DEMO 2006 Demos

This post from Jack Krupansky contains links to all of the DEMO 2006 conference Demonstrator Presentations and Profiles. As he states: "Even if you don't want to watch the actual videos, the profile descriptions are reasonably informative."

Series A Round Pyrrhic Victories

Will Price observes that too much money and too high a valuation in a Series A round financing may be counterproductive, stating:

"Ideal company formation reminds me of agile programming - small teams driving quick, iterative cycles that allow for the most insights, appropriate changes in strategy, and, ultimately, the highest quality "product"...

Too much money too early and too many people too early interferes with the productive process of iteration. Large teams with lots of resources and a very uncertain sense of direction or purpose are a bad combination...

An equally challenging problem is a too high "A" round post-money. High "A" round valuations are often Pyrrhic victories. High posts and middling execution often leaves a company in a grey zone whereby objective value-creating milestones have not been clearly met..."A" round financing strategies should be tied to discrete logic tests and proofs...Can we validate the technology and business model?...Will the product work? Will customers buy it? Can we sell it? If so, how? How much do we need, with a slight cushion, to answer these questions?...

A reasonable Series "A" raise and post-money valuation combined with realized value-creating milestones generally leaves a company in an enviable position when raising the Series "B". The key hypotheses have been validated and a reasonable mark-up is possible."

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Carnival of Entrepreneurship Second Edition

Edition two of the Carnival of Entrepreneurship is up at Small Business Trends. I found the posts on ten steps to turn around a company and "Is Innovation Dead" to be particularly useful and interesting, but all seven articles posted are worth reading.

Key Elements of a Useful Business Plan

"The four main uses of a business-plan (BP) are as follows:

• A BP is a written document that you can use in your search for external financing.
• A BP is a tactical planning and management tool for your business.
• A BP is a document showing the capacity of your team to control and manage all the aspects of the company.
• A BP brings you new ideas to refine your project by checking and estimating the induced hypothesis.

The drafting or update of your business-plan is essential to the good management of your company. It can be used when searching for a business partner, for obtaining external financing, and for defining some stages of the development of your company, such as:

• The creation of your company.
• The launching of a new product.
• The establishment in a new market.
• The transfer, buy-out, or the structural development of your company. "

Read more about the fundamentals of building a good business plan in this post from business toolchest found via this Small Business Brief post.


Start & Run a Web Business

This excellent Squidoo lens from entrepreneur Nik Cubilovic "will guide you through starting and running a web startup business and everything that is involved in the process. Take shortcuts by learning from the mistakes others make and learn about what works and what doesn't work by absorbing the mass of information avaliable online now about the web, business, customers and marketing."

If you like the lens and would like to find out more about starting a web business take a look at its author's blog at www.nik.com.au

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Beware of Unbalanced Values in Your Life

"Every value has a corresponding fear. The stronger the value, the stronger the fear will be...Achievement is a good example. It’s a value, of course, and a powerful value for many successful people. They’ve built their lives on it. They achieve at everything they do: school, sports, the arts, hobbies, work. Each fresh achievement adds to the power of the value in their lives.

Gradually, failure becomes unthinkable...It becomes the supreme nightmare: a frightful horror they must avoid at any cost. The simplest way to avoid failure is never to take a risk. Stick rigidly to what you know you can do. Protect your butt. Work the longest hours. Double and triple check everything. Be the most conscientious and conservative person in the universe...

Beware when any value—however benign in itself—becomes too powerful...Over-achievers destroy their lives and the lives of those who work for them. People too attached to “goodness” and morality become self-righteous bigots...

Balance counts for more than you think. Some tartness must season the sweetest dish. A little selfishness is valuable even in the most caring person. And a little failure is essential to preserve everyone’s perspective on success. Are you a positive person? Maybe you need to cherish the negative parts too."

Read more in The Coyote Within :: Overcoming Fears.

Write a Compelling Executive Summary

"Most guides to writing an executive summary miss the key point: The job of the executive summary is to sell, not to describe....You have about 30 seconds to grab an investor’s interest. You want to be clear and compelling. Forget what everyone else has been telling you. Here are the key components that should be part of your executive summary:

1. The Grab: You should lead with the most compelling statement of why you have a really big idea....
2. The Problem: You need to make it clear that there is a big, important problem (current or emerging) that you are going to solve....
3. The Solution: What specifically are you offering to whom?...
4. The Opportunity: Spend a few more sentences providing the basic market segmentation, size, growth and dynamics—how many people or companies, how many dollars, how fast the growth, and what is driving the segment...
5. Your Competitive Advantage...
6. The Model...What are the critical metrics on which you will be evaluated — customers, licenses, units, revenues, margin? Whatever it is, what impressive levels will you reach within three to five years?
7. The Team: Why is your team uniquely qualified to win?...
8. The Promise ($$): When you are pitching to investors, your fundamental promise is that you are going to make them a boatload of money...You should show five years of revenues, expenses, losses/profits, cash and headcount. It might also make sense to show a key driver, such as number of customers or units shipped.
9. The Ask: This is the amount of funding you are asking for now. This should generally be the minimum amount of equity you need to reach the next major milestone...

You should be able to do all this in six to eight paragraphs, possibly a few more if there is a particular point that needs emphasis. You should be able to make each point in just two or three simple, clear, specific sentences. This means your executive summary should be about two pages, maybe three. Some people say it should be one page. They’re wrong..."

Read more in this excellent article from Garage.com

Serial Entrepreneurs: Itinerant Gunslingers

"Many of today's brightest innovators have become itinerant gunslingers fortified with venture financing. They hatch technologies, shepherd them into the marketplace, and negotiate 'liquidity events' in which their investors can cash out at a hefty profit, usually within five to seven years. Then they do it all over again...

'Their assumption going in is they're going to be sold, so they try to get their companies to $30 million, $40 million, or $50 million in revenue, rather than going for the home run," he said. ''If it's in your DNA to go for the home run, you're going to be frustrated.'"

Read more in this story from The Boston Globe


How to Write a Job Description

"Accurate and concise job descriptions are critical for your company’s personnel management. First, the job description is used to recruit applicants that are qualified and who are capable of performing all of the duties that make up the job. During the interview process, job descriptions can be used to focus the questioning on tasks and qualifications that the job requires...

Job descriptions can, and should also be used to evaluate employee performance. Each duty listed in the job description should be an area addressed by a bi-annual or annual employee evaluation, and scored as poor, needs work, average, or superior work performance...

These two tools will help protect you against lawsuits for wrongful termination and for use in disputing unemployment insurance claims. You can document that you provided the employee with a job description and that they were aware of all of the duties for the position. You can also produce your evaluation forms that are based on the job description showing exactly where the employee failed to meet the performance standards of the job..."

Read more in this Associated Content article.

Limited Liability Company (LLC) Basics

"A limited liability company (LLC) combines attributes of both corporations and partnerships (or, for one-person LLCs, sole proprietorships): the corporation's protection from personal liability for business debts and the pass-through tax structure of partnerships and sole proprietorships. And, while setting up an LLC is more difficult than creating a partnership (or sole proprietorship), running one is significantly easier than running a corporation."

This article from nolo.com explains the basic features of an LLC.


When Do You Need a Patent?

"For BusinessWeek online, Michelle Dammon Loyalka asks When Do You Really Need a Patent?

While conventional wisdom says every new vision needs immediate protection, it’s important to realize that seeing your idea through from conception to completion is a long, rigorous, and expensive process, and patenting should be one of the last steps you take. In fact, Bob Lougher, executive director of United Inventor’s Assn., a Rochester (N.Y.)-based inventor’s education nonprofit, says rushing to patent is the independent inventor’s enemy No. 1.

Visit this Startup Fever post for a link to the article

Choices in Business Legal Structure

Brad Feld explains that the best choice for structuring an entrepreneurial enterprise depends on the financing path you are ultimately planning on going down:

"S-Corp: If you are not going to raise any VC or angel money, an S-Corp is the best structure as it has all the tax benefits / flexibility of a partnership – specifically a single tax structure vs. the potential for double tax structure of a C-Corp – while retaining the liability protection of a C-Corp.

C-Corp: If you are going to raise VC or angel money, a C-Corp is the best (and often required) structure. In a VC / angel backed company, you’ll almost always end up with multiple classes of stock, which are not permitted in an S-Corp. Since a VC / angel backed company is expected to lose money for a while (that’s why you are taking the investment in the first place!) the double taxation issues will be deferred for a while, plus it’s unlikely you’ll be distributing money out of a VC / angel backed company when you become profitable.

LLC: Often an LLC (Limited Liability Company) will substitute for an S-Corp (it has similar dynamics) although it’s much harder to effectively grant equity (membership units in the case of an LLC vs. options in an S-Corp or C-Corp – most employees understand and have had experience with options but many don’t understand membership units.) LLC’s work really well for companies with a limited number of owners; not so well when the ownership starts to be spread among multiple people."


Carnival of Entrepreneurship #1

The first Carnival of Entrepreneurship is up at About.com. Check it out for some good tips and advice.


Managing Creative People

This article, Managing for Creativity by Richard Florida and Jim Goodnight for the Harvard Business Review Online provides useful insights into the best way to "manage" creative persons, stressing the importance of valuing work over tools, rewarding excellence with challenges and minimizing hassles.

Super Bowl Prayer

Our Father,
Who is Art Rooney in Heaven,
Football be thy game.
Thy kingdom come,
4 Super Bowls won,
On earth as it is in Detroit.
Give us this day our Super Bowl victory,
And forgive us our penalties,
As we defeat those who line up against us.
Lead us to a Super bowl victory,
And deliver us to history.


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Cruelty to Animals: Steelers Style

A wave of animal cruelty has the World Wildlife Federation up in arms. On the first day of this new year, a lion was found viciously mauled. A week later, a Bengal tiger was discovered horribly beaten. While the lion only had fresh wounds, the tiger appears to have been suffering regular beatings for years.

Just seven days after that, a colt was found battered. People at the scene said it kept muttering something about not getting enough protection.

Hours ago, Denver authorities found another horse, this time a bronco, wandering the streets. The horse was not physically injured, but quite dazed and confused. When asked about the incident, the hapless horse said "I was at home and everything was fine. I was about to feed my pet snake when he started choking and screaming about some sort of terrible towel following it around."

Rumor has it that the next target will be some sort of bird, a seahawk. All of the victims report trying to peek behind a giant steel curtain shortly before their incidents.

As a result, the following warning has been issued to all animals: Beware if you peek behind a steel curtain, you will get hit by THE BUS.

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