Startup Q&A #7: Expenses, Conferences, Performance Metrics, Legal Structures, Business Skills

Hey, everybody, Matthew Paulson here. Today we're going to talk about prioritizing expenses, attending business conferences, identifying key performance metrics, business legal structures, and critical business skills. Let's do this. This is officially episode 7 of Startup Q and A, the online video show that helps startup founders, entrepreneurs, and small business owners grow their businesses faster and achieve their dreams of financial freedom. So whether you're just getting started or you have 100 employees, startup Q and A is the show that will give you actionable ideas and advice that you can implement in your business. So before we get into the questions, I want to share a tip in a segment that I refer to as the growth Hack of the week, where I provide you a tip or a strategy that you can use to grow your business faster. So the growth hack of this week is to conduct a virtual media tour, a podcast tour, a blog tour, a mix of both. So kind of about 20 years ago, when somebody would release a book or have a big new product, they would try to get interviews and get booked on every big TV show, get their stuff in magazines, get their stuff in the local newspaper, they would do all these different types of things to get free media. And this strategy still works, but it has changed quite a bit. In most cases these days, mass media coverage just won't work because one, it's really tough to get the attention of somebody like the Today show or a major media outlet. They just don't care about your stuff and they've got a hundred other people just like you banging at their door trying to get attention. However, what does work is that there are probably some industry specific blogs, podcasts, other publications that are very relevant to your audience, that your audience already reads, or people that you would like to be part of your audience, they're probably already reading these publications. And these types of people, they have smaller audiences, but they're much more relevant and they don't have a million people pounding at their door to try to get attention. I've done this pretty successfully. Whenever I have a book or something else that I want to promote, I've got maybe 10 different podcasts where I can just knock on the door of the person who hosts that podcast and say, hey, you should have me back on your show. I've got some more interesting things to share with your audience. A great example of this, when I released my email marketing book, Email Marketing Demystified, I messaged my friend John Lee Dumas of Entrepreneur on Fire and said, hey, John, I've got this new book out. It's been a While since I've been on a show, I'd love to come back on and share these specific action items with your audience. And I did this for probably about 10 different shows. I got on several of them. You can see them@mattpulson.com interviews and if you go back to about October of 2015, I think it's when that book came out, you can see all the interviews that I did over that time period to kind of promote the book. And it worked out really well. You can also do guest blog posts. People that have blogs in your industry, you can do the same kind of concept, but. But instead of doing an interview on their podcast, you could write a guest blog post for their blog. And these guest interviews and these guest blog posts are just really a great way to access and kind of leverage other people's audiences and help those people become part of your own audience. It doesn't cost you anything to do this. It just takes some time in content creation. But it's just a great, easy, free way to kind of grow your audience without having to fork over a lot of money. So if you'd like to do a virtual media tour, make a list of the relevant publications in your industry, email them, and pitch yourself as a potential person to be interviewed. And it's really that simple. I've got a guide on my website that shows exactly how to do this and we will put that in the show notes. So that is the growth hack of the week. Let's dive into the questions. Every week we take five questions that are submitted through Facebook. So. So if you would like to have your question answered on Startup Q and A, go to the domain startupq and a co that will redirect you to my website. And then under the Startup Q and A menu item there is a link that says ask a question. I also periodically ask my friends on Facebook and Facebook groups that I'm a part of if they have questions. So if you see one of those posts, you know that is also a great way to ask a question for this show. All right. The first question comes from Anna Hieronymus and she asks chicken or egg scenario for a startup nonprofit purchase office space prior to having funding to hire the executive director or funding to hire the executive director prior to having office space from them. So Anna is really asking, how do you prioritize spending when resources are extremely limited? If you haven't received a big venture round, this is probably going to be an issue that you'll face in your startup or your small business. There's A lot of things you could spend money on and would like to spend money on, you just don't have the money to do everything that you'd like to do. So really what you need to do in this situation is prioritize your spending on the things that will create the most growth and impact in your business. Where can you allocate money that will build an audience, drive your product forward, or create revenue? Those are kind of the three things that you could focus on. So how can I grow my audience, how can I move my product forward, and how can I create revenue? You should focus your spending on those three things first. So in most cases, putting money towards people and marketing will create the most impact on your business more than anything else, because people will help drive your business forward in terms of product and really everything else. And marketing will help get new customers in the door. For your specific situation, I would definitely focus on hiring the executive director first. Having a person in place talking about your nonprofit full time will just create a lot more impact for your nonprofit than having an empty office with your name on it. Having an executive director, even if they're working out of their house, they'll be able to create awareness, they'll be able to raise money, they'll be able to drive the mission of your nonprofit forward. Frankly, there are a lot of startup nonprofits that just don't have any office space. They want work out of co working spaces. They share somebody else's office, they work out of their house. There's plenty of options for somebody to work that doesn't have a space of their own. So really get that executive director in place first and then if there's really a need for office space, go raise the money for the office space at that point. And you might also not be aware there are some great, really affordable options for office space in Sioux Falls. For nonprofits. For example, Sioux Falls Seminary, they're right next to Augustana. You know, they rent out office space to like minded nonprofits for I think around $250 a month. So it can be really affordable just to get a single office. You know, I rent an office here at the Creative Co Op. It cost me $400 a month. It's, you know, a nice kind of 200 square foot office with this great brick wall. I'll see if I can show it off to everybody here without breaking the camera. But I've got this nice little office here with a couch and a TV and an office space and it cost me $400 a month. I also get access to a great conference space and it's just really affordable for what it is. So don't think that you have to spend $1500, $2000 a month on a really fancy office. There are options that are much more affordable. There's also co working options, places like the Zio center for Entrepreneurship and the Bakery. And you can always just find somebody who has an office with an empty room in it and rent out that room from them on kind of a sublease basis. So there's plenty of options to get cheap office space if you need it. The next question comes from Orion Moran and Orion asks what conferences will you be attending in 2017 and what is your favorite business conference to attend? Now of course Orion asked this question because his conference is probably my favorite conference to attend, but it's still legitimately a good question. So currently I plan on attending four conferences in 2017. In March I will be going to the Traffic and Conversion Summit in San Diego. That's put on by the digital marketer company and that is probably the biggest conference I go to every year. There's about 3,000 people. The content is pretty good. They know a lot of stuff about funnels and Facebook marketing and topics that I'm less of an expert on. So that is a great place to go to learn about sales funnels and stuff like that. I'm bringing the whole US GolfTV team to that event this year or our company is. So U.S. golf TV has found that really valuable as an event. We sent a couple people last year. We're going to send I think a lot more people this year. The one kind of challenge with digital marketers trafficking conversion is because it's so big, it's kind of hard to connect with the types of people that you want to connect with. Certainly I'll run into people that I see there, but there are also people that work at big companies and people that work at digital agencies that go to learn stuff that they can implement in their clients businesses. Those aren't necessarily the type of people that I want to network with because they don't face the same kind of challenges that I do. I want to network with other entrepreneurs that run their own ship and it's harder to find these people at a big event like that. The second conference I'll be going to is microconf Growth Edition in Las Vegas. That's in April. And I didn't get to attend this last year because my wife was like nine months pregnant when this happened. But I did get a go in 2015 and it was a great event when I attended there and I just had a really great time. What I like about microconf is that everyone who is there is kind of a software person developing their own thing. So everyone in attendance has some really good technical skills and you can just learn a lot from the people there. The content is also very good. It's just a good group of geeky people like me that run businesses that get together for a couple of days in Vegas in April. So if you have any kind of software business, I'd encourage you to check out microconf. It's kind of tough to get tickets now unless you've attended before. But if you get on your mailing list and like wait for the car to open to buy a ticket, you can get in. But it usually does sell within the first couple of hours, so be aware of that. In October, I think I'll be going back to Rhodium Weekend in Las Vegas. Kind of depends on what other obligations that I have in October that year or next year. But you know, Rhodium Weekend is a conference for people that buy and sell income generating websites. I first attended that conference in 2014. I was looking to sell a business at that time called Lightning Releases. I found a buyer there and I made, let's just say multiple six figures from that sale because I met the potential buyers at that conference. So if you have an asset, an online business that you'd like to sell at some point, Rhodium Weekend is a great place to go because you'll learn how to sell the business, you'll meet the brokers that you'll probably hire to sell your business and you could meet some potential buyers there as well. That is in October. Roadingweekend.com for more information. And in December I will be going back for sure to Austin, Texas for Freedom Fast Lane Live. You know, Ryan asked this question. Ryan runs the conference, but it really is my favorite conference to attend every year. And I think the reason is, is that just the quality of attendees is really high. Everybody there, you know, wantrepreneurs don't go to this event. It's all people that are building businesses. A lot of people have Amazon, FBA businesses that attend this event. But there's also people in other spaces like me that go there. And the speakers are really high end. This year we had Peter Diamandis, Alicia Silverstone. I got some great pictures with them. You just also got to meet some really legitimate people. Last year Grant Cardone was there, Robert Herjavec Was there just some really high end names? They really deliver on the speakers at this event and I just can't wait to go again next year. So there are a few other conferences that are kind of on my radar. Haven't decided for sure if I want to go to them. Podcast Movement is a podcasting conference that I might want to go to now that I run a podcast of sorts, Startup Q and A show. And there's also a conference put on by LeadPages in October, put on by the LeadPages team. I don't remember the name of it, but I might try to go to that next year as well. So that's kind of on my radar as well. So the four conferences are Traffic and Conversion, microconf, Rhodium Weekend and Freedom, Fast Lane Live, and then maybe those other two, depending on how things are going at home and you know, what my schedules look like. The next question comes From Anthony Fasano Jr. He asks, what financial reports and indicators should you be watching for your business and how often should you be looking at them? That's a great question. So metrics that you will track will probably vary a lot depending on the type of business that you have. But the way that I kind of figure out what metrics do I want to track is I think about all the different steps that somebody needs to take to become a customer of my business. So for MarketBeat, somebody has to land at one of my websites, they have to fill out the opt in form, they have to confirm their email, they have to get a marketing email from me for one of my products, they have to click on that link in the email, they have to go to the landing page, they have to click through to the sales page, they have to complete the sign up form, give me their credit card, click that button, and then after they become a customer, then I have to keep them happy, keep them engaged, to continue keeping them to be a customer. So each one of those different steps is something that can be measured, managed, optimized through split testing and multivariate testing. So the more people that I can get from the top of that funnel down to the bottom through all those different steps, steps, you know, the higher, I guess, conversion rate that I'll have in my business, you know, more customers coming in, you know, getting all the way through that funnel to become a customer, so you know, what percentage of people that land on my websites become my customer and then all the different steps in between and then how can I get more people from one face to the next to the Next to the, next to the next. Those aren't the only metrics I track, but it does kind of illustrate the principle that I'm trying to get to. It's just the classic idea of a conversion funnel. How can you get as many people from the top of that funnel down to the bottom if you focus on those things? Those are some very good starting metrics to track. There are also some very specific financial metrics to track. Obviously, everybody should be looking at their profit and loss statement every month and their balance sheet. How much money do I have in my business? I also like to compare what revenue by category every month. So my business has several different income streams and I like to see how is each of those income streams doing compared to the previous month. MarketBeat also has a recurring revenue component. So we track things like customer acquisition costs, the lifetime value of a customer, churn rate, annual recurring revenue. These are important metrics for a SaaS business. So customer acquisition cost, how much money does it take to acquire a customer? That's an important metric for any business. Lifetime value of a customer. How much revenue is each customer worth to me over the lifetime that they are customers of my business? So from when they first buy to the last thing they buy, how much are they worth to me? And then annual recurring revenue, what is the sum total of all of the subscriptions that we have in a year? So at MarketBeat, we track these statistics in real time through some really good software that we have and data collection. So I can peek at them daily and kind of monitor what I'm doing. If you don't have these automated tracking tools in place, it's more of a manual process. I'd probably look at them either weekly or monthly. But there are some great tools that can help you automate this. If you have a subscription service, there's a great tool called Barometrics that will track a lot of these different metrics for you and calculate them for you in real time. So check out Barometrics. It's only if you use stripe, but a lot of people use stripe. So if you have a recurring revenue product and you're used stripe, Barometrics is really a great service to track these numbers. Next question comes from Matthew Robert Timms. Matthew asks what is the most important skill for starting a business? Is it marketing, sales, financial understanding, market understanding, product development, or vision casting? You know, this might seem like the type of question that there's no right answer to, but I really do think there is a right answer to this particular question. The answer is Driving sales. The reason that driving sales is probably the most important aspect of running a business is because you can have an incredibly boring, unoriginal, unexciting business idea. And if you know how to drive sales to that business, you're going to be successful. Let's take a look at the example of 1-800-got-JUNK. So the founder's name was Brian. I think it sucked more. And he literally got started with one truck and $700. And the idea was, hey, we'll come to your house, we'll take your crap away so that you don't have to worry about it anymore. It's literally an on demand trash service. Nothing innovative, exciting or cool about it. They just did the hustle. They made it work. You got started going door to door. They put the branding on the side of their trucks, they worked to get local media interviews. Eventually they were able to franchise it. And now 1-800-got junk is 150 million dollar a year annual business. So this not all that exciting idea, that's really not all that innovative is now a 150 million dollar company because the founders of this company knew how to drive sales. So if you can figure out how to do marketing and drive sales and it really doesn't matter what your business idea is, if it's half decent, you'll get customers. If you can figure out that marketing and sales component, you don't have to have the best financial mind in the world. You don't even have to have the best product in the world. You don't have to have the biggest vision in the world. None of those things really matter unless you can drive sales. If you don't have any business skills right now and you want to figure out what to develop, I'd encourage you to really work on your marketing and sales knowledge and just try to sell something to somebody. So even if that's going door to door, solid magazines, go ahead and do that because rejection will hit you in the face hundreds of times over. You'll get used to it. You'll learn what works to sell to people, how to talk to people, how to relate to people. And these types of skills will come in really handy down the line. If you don't have these skills right now, figure out how to sell stuff. And don't say that I'm not a salesperson. That's not really for me, it is a legitimate skill that can be learned. I didn't know how to sell, but I started a consulting company maybe eight years ago on selling websites to people. I Figured it out. And I regularly sold five $10,000 websites to people face to face. Nothing fancy about it. No fancy online marketing funnels. It was just me having conversations with people, taking a sales meeting and selling them on a website. I have no natural ability to do this. I'm not good at talking to people. I'm shy, I'm an introvert, and I learned how to sell to people. So you can definitely do that too. So that I really do think marketing and sales is kind of that one key critical business skill that you as a founder need to know. Because without customers, you have no business. So learn how to acquire customers. That is the single most valuable skill that you can have in your business. The next question comes from Kendall Johnson. And Kendall asks, what legal structure should we use in our business? Should we be sole proprietors? An llc? An S Corp or C Corp? We are husband and wife owners of a business. First, let me offer the standard disclaimer that I'm not a lawyer and I don't play one on the Internet. So you should probably go talk to a lawyer as part of making this decision. But let me share kind of what the different options are and kind of where I landed and maybe that will be helpful to you. So the first option is being a sole proprietor. And this just really means you haven't done anything to be any kind of legal corporation and you are just filing your business income and expenses on your own personal tax return. The next step up from that is being a limited liability company. It is kind of a separate legal entity that can shield you from liability if your business gets sued. So let's say that my company MarketBeat does something wrong. We get sued because it's a limited liability, theoretically, because it's a limited liability company. Theoretically. If somebody sued the business, they could take the assets of my business, but they couldn't take out my personal. They couldn't go after my personal assets that are outside of my business. So that is kind of the primary benefit of having an llc. And in most cases you should probably at least do that. A C corporation is a type of corporation commonly used by big companies and companies that are trying to raise venture capital money. C corporations are subject to corporate income tax. So for most small business owners, the C corporation isn't the best choice because of the double taxation issue. So if you're listening to this show and you're not going to be the next Microsoft, probably not the thing for you. But again, I'm not a lawyer, then an S corporation is a type of corporation where the profit just flows through to the owner's tax returns. So there isn't that double corporation that or double taxation that the C corporation has. But if you do have an S corporation set up, you have to run payroll. So you can't just not run payroll and take the profit home at the end of the year because you'll get in trouble with the IRS for not paying payroll taxes. And that is one lesson that I learned the hard way. Had to spend about three grand and refile a bunch of tax returns to fix that issue. The nice part of having an S corp is you can. You can sidestep some of the payroll taxes. So theoretically, you owe payroll taxes on about the first, I guess around $130,000 a year in 2017. So from 0 to 130,000, you have to pay Medicare and Social Medicare and Social Security tax, which ends up being, you know, 13, 14, 15% somewhere in there from both the employer side and the employee side. So let's say your business makes 200 grand a year. You pay yourself a salary $50,000. You pay payroll taxes on that $50,000. But then you don't pay payroll taxes on the kind of $150,000 that was on top of that. So the limit is actually $127,000. So if you pay yourself 50,000, that's $77,000 that you don't have to pay payroll taxes, which is a really nice savings of I think around $12,000 per year is what you would save by doing that. It's a really nice way to get out of having to pay some taxes. So in my case, MarketBeat, the name of the company is actually American Consumer News llc. That's the name of the brand that I had before MarketBeat. I just kept the same LLC. We are a South Dakota limited liability company, and we filed form 2553 with the IRS. And that makes us taxed just like an S Corp would be. So we get the kind of more simplified structure of being a limited liability company, but we also get the tax benefits of being an S Corp. So that's kind of where we landed again. For the third time. I am not a lawyer. Don't copy what I did just because that's what I did. Buy an hour of a lawyer's time, give them the 200 to $300 that they charge for an hour of their time, and get their advice. It's really not that expensive to have one conversation with a lawyer saying, hey, what structure should I be? You want to pay them another thousand dollars or so, they can set up that corporate structure for you so that you don't have to mess with that paperwork yourself. But it is a very important decision and I really encourage you to get professional advice from an attorney, give them the $200 to $300 that it takes to buy an hour of their time, and just get good advice before making that decision because the tax and legal implications on your business are massive and it is just worth paying that money. Let's move on to the final segment of the show, the Resource of the Week. In this segment, I recommend a book, a podcast, or a tool that can help you grow your business faster. So today's Resource of the week is ManageWP. And ManageWP is an online service that can help manage all of your WordPress websites in one place. So if you run an online business, there's a pretty good chance that you have several websites and they're all powered by WordPress. And if you're like most people, your websites haven't been backed up, they haven't been updated, they haven't been checked for security issues pretty much ever. So. So ManageWP is kind of a centralized WordPress management tool that takes care of all these issues on your WordPress websites in one place. So it's kind of got this separate website that you log into, and then you can easily log into all your WordPress websites. You can update the software on them with one click, get all your plugins updated, get your WordPress software updated, get your templates updated with one click across all of your websites. It also does backups, so you can backup all of your websites with that one click of a button. You also do a security scan to see if your websites have been hacked. That is really useful too. There's a ton of other different features that I don't have time to get into right now. But if you need to clone a website, you need to post content to all of them, install the same plugin to all of your different websites. It does a bunch of different stuff like that. So if you have a bunch of different WordPress installs on your hosting account somewhere, I encourage you to check out ManageWP as kind of a single tool to log into all of them and then keep them updated, backed up, and secure. So managewp that is the resource of the week. It's just managewp.com to check out that tool. So if you'd like to subscribe to the startup Q and A show and get next Monday show delivered, you automatically go to StartupQA Co, and there are links to subscribe on YouTube, iTunes, Stitcher, RSS, email, Facebook, just about anything you would want to do. You can also follow me on facebook@facebook.com MatthewPaulsonPage and then I'm MatthewDP on Twitter. So Matthew, then D as in dog and P as in pony. You can follow me there as well. So if you enjoyed the show, I'd encourage you to leave a review on itunes or Stitcher and tell other people that you enjoy it. You don't even have to write a review. Just go on iTunes, click the 5 star rating to tell people that you love this show. That will help us reach more entrepreneurs and help us help them grow their businesses faster and achieve their dreams of financial freedom. That's pretty much it for the show this week. I'm Matthew Paulson. And that's it. Thanks everybody.