How to Help Entrepreneurs Succeed Now

Hi, I'm Evan Carmichael. Welcome to another edition of Ask Evan. Now last month I put out a call on YouTube asking for questions from readers that we're going to answer on this channel for our video here in December, and we got so many questions. I'm going to pick the top 3 that I really liked, and we're going to answer them now here today, and then I'm going to be answering more as part of our challenge series in 2013. So 3 of the questions that I got asked, I'm going to pull them up here. I've got my Samsung Galaxy Note 2 that I've got some questions on. So the first one is from one of our YouTube viewers. "When were you the happiest? Thanks for your inspiration. Don't stop making videos." I'll keep making these videos as long as you guys keep watching the videos. In terms of what makes me happiest, I'm happiest when I'm helping entrepreneurs. And that may sound really cheesy or corny, but that's what drives me. I love helping entrepreneurs. And I think A big problem is a lot of entrepreneurs don't start asking for help until it's almost too late. You know, they've tried everything on their own, they're at their wit's end, they're frustrated, exasperated, out of money, and don't know what to do next. You know, thinking about quitting, giving up, and they come to me and they ask me their questions as kind of a last resort, and I'm able to help them. And seeing their eyes light up that A, you know, somebody believes in you and thinks you can accomplish it, and also has given you some practical suggestions and advice to help you grow your business. That's awesome. Like, seeing somebody light up like that makes my day. I wish I could do it all day long. I try to do it as much as I can as part of my business. And so whether it's, you know, face-to-face or trying to make videos like this for you guys or over the phone or at a conference or speaking event, I love helping entrepreneurs and try to incorporate that as much as I can again into my day-to-day life. So You know, whatever it is for you, you want to find that passion. I'm fortunate that I found that relatively early on, and I can try to live that and do that every day. And hopefully some of the excitement and passion is coming through in this video as I'm talking to you. But that's what really drives me, and that's when I'm happiest. So hopefully you find that happiness for your business as well. So thanks for that question, question number 1. Okay, so we're going to turn to question number 2 now. It comes from one of our readers, Skip. So Skip wrote in saying, "My main question is getting seed or startup cash, whether I sell shares of my company to people I know or go to a VC who might be able to help my business along because of their expertise, connections, etc." Thanks for the question, Skip. Very common question for entrepreneurs who are starting up, trying to get the money to grow their company. The first thing I would think about is, do you really, really, really absolutely need the money to start this business? A couple of reasons why I ask that. The first is raising capital almost becomes a full-time job for your company. So what it does is take away your time to focus on actually building up your company. So if you're out spending all this time meeting VCs and meeting, you know, individual investors, friends, family, angels, whatever it is, that's time that you're not being, you know, not putting into actually growing your business. So do you absolutely need that money to get going, or is there a way that you can bootstrap it up, at least get to a certain point, and and then look at raising capital, which would be easier. The second component to that is you're gonna get killed in your valuation. The valuation on a startup is way, way, way worse than if you have even one customer, a little bit of money coming in for your company. When I was in the VC business, we got tons and tons and tons of proposals, and most of them were just an idea. And it's really hard for you to stand out against everybody else. The fear is that you're not gonna be able to make it. Anybody can spend money, right? If I gave you— I don't know how much you're looking for— $500,000, $1 million. If I gave that to you, you could spend it, right? Anybody can spend it. It's hard to make the money, and it's hard for you to stand out from everybody else who's promising the same thing as you are. So if you're able to build up your business, at least to a certain point— I'm not going to expect you to build a gigantic business all on your own bootstrapping it up— but if you can get some customers and find ways to save costs and grow a little bit of a business and get some momentum going behind you, then when you go to investors, whether it's VCs or friends and family or angels, it'll A, be much easier to get them to say yes, because the easiest money to raise is expansion capital instead of startup capital, but also you get a much better valuation. So you're not giving up as much of the business as you would if you need that money all up front. So something to think about if you really, really need that money or not. I'd really encourage you to try to bootstrap it up as much as you can before going for investment. If you have to go for investment, the next thing that I'd look at if you're comparing friends and family and angels to VCs. The first is how much of an active role do you want somebody to play in your business? So obviously if you're going with a VC partner, you want somebody who can bring connections and, you know, contacts and partnerships and media and customers to your business. It's ideally much better than somebody who's just giving you money. The range will depend on how much money you need to grow your business, right? If you need $100,000 for your company, you're not really going to be able to attract a venture capital investor to come on for that. It's not— it's too low. You're looking at friends and family or angels. So depending on how much you need, you know, if you're looking for half a million or a million dollars, then you're playing in VC territory. And, you know, unless you have really, really wealthy friends, they probably won't be able to afford a half a million or million dollar price tag. So right away, depending on how much money you need, that's going to depend on, you know, who you end up going after. Then you want to think about how much involvement you want them to have in your business. So if you're going for friends and family, you know, it's all great when the business is going well, but business doesn't always go super well, right? So if you have Uncle Joe putting money into your company and it's not going well for him, then is that going to make Thanksgiving dinner really uncomfortable because Uncle Joe, you know, is losing money on your business? Or maybe he wants to really be involved in your company but doesn't have any skill sets that could you could really use. So, you know, do you want to have him as part of your management team or not? Some questions that you want to ask yourself. But definitely you want, ideally, if you are going for an investor, somebody who can bring on more than just money and can bring on connections and experience and can complement some of the weaknesses that you might have as an entrepreneur. One last tip about raising capital. If you know you need a certain amount, so say you need $500,000 for your company, I try to phase it out. So instead of saying half a million dollars right now, I try to phase it out with milestones. So say you need $100,000 now, and then in 3 months another $200,000, and in 3 months another $200,000. You can go to an investor and say, this is how much I need, and this is when I'm going to need it, phased out over a period of time. And if we hit certain milestones, it could be revenue targets, or number of customers, or whatever it is that makes sense for the business, then you can ask for better valuation. So instead of giving up a big chunk of your company for that half million dollars now, you can give up, you know, only a little bit at that $100,000 startup, and then in 3 months you've hit your milestones, you get another $200K at a better valuation, and another 3 months you get the final $200K at an even better valuation because you've hit your milestones and have shown your investor that you're not just going to be every other startup that fizzles out. So you're reducing the risk for the investor, and you're also giving yourself a a better valuation, and you're betting on yourself. You're saying, "Yeah, I'm going to be able to hit these targets." And so by doing that, you're going to get a much better price for your company. So a couple of things to keep in mind, Skip. Good luck with the business, and if you have any other questions, let me know. On to question number 3. Alright, so question number 3 comes from another one of our readers, Neo Kabi. So he wrote in, "I have a question. I'm working for 2 companies. I'm doing a beauty salon and part-time marketing at an events company. In both companies, I am responsible for attracting new clients to the business." business, what is the best and most efficient way to do this and make it cost-effective? So thank you for the question. Another great question. You know, as entrepreneurs, we don't have a lot of money to invest into our efforts, so we want to make sure that the money we're putting in is being spent as wisely as possible. And I hate spending money until I'm making money. And if there was a rule for entrepreneurship, that would be one of them, is don't spend until you earn. So I try to bootstrap it. Put in your time, but not start spending a lot of money until you find a way to make money. And if you can do that on a small scale, then you invest your money into making it more successful. For attracting new clients, my favorite way to do it is through partnerships. So going out and cold calling and doing advertising and, you know, calling on people, going to events can be a very time-consuming process, very expensive, very slow, and you have to go through the process of educating customers on why they should come to you. Where if you're going through a partner, it's super fast and can be very cost-effective because you're basically finding people who are already selling to your target market. So you find somebody who's selling to your ideal client and you strike up a partnership agreement with them. So that can range from giving them a cut of the sales or just, you know, something as goodwill, giving them an option for their clients, or you're gonna be referring business back to them as well. You basically want to look at who are people who are also selling to your target market, and ideally what you look at is not direct competitors, because why would they refer customers to you, but you're looking at people who— where are they buying before they buy from you? So this events management company, who are they buying from before they come to you? Maybe it's an event planner, so then you want to partner up with event planners. So think through that buying process Where are they buying from before they end up coming to you? And start talking to those people and strike up partnership agreements with them. So they already have your target market, they're selling to them, they have a relationship with them, and so when they say you gotta work with this company, there's an incentive to wanna do it because they've been referred in. And referred clients ask less questions, are more qualified, buy more, are more loyal, stay with you longer, spend more. Spend more money. It's the best type of client to get, so you want to start making those partnerships with similar companies who can, you know, be very synergistic with the same types of clients that you have. So that would be my number 1 tip on the marketing side in terms of being something cost-effective and also being fast to get to market. Hopefully that helps. Thank you guys for joining us for another video. We're going to have a lot more coming in 2013. If you like the video, please give it a thumbs up below. I love seeing those come out. And if you have a comment or question, feel free to leave it below in the comment section. I always read those. I love seeing them, and I always reply as fast as I can, not always immediate, but as fast as I can. So thank you. Have a great end to the year, and we'll see you in 2013. Mm-hmm.