Over the last 9 years and two startups I have learned many things and screwed up royally in some cases. This ongoing series is about providing you best practices of lessons learned and avoiding the mistakes I have already made.

In the past, I have had good years and bad years. When you have employees, they expect to be paid and when you mess with payroll (and payroll taxes, but that is a post for another time) you create such a negative culture that nothing will get done.

With that said, when you are starting your business regardless if it is a service or product company, you will have startup costs and probably forgo paying yourself for 6-12 months to keep growing the business. That is fine and to be expected. What you should not do (and what I did) is keep adding staff and sacrifice your own salary in the name of growth. If you keep going like that and have a bad quarter you will have nothing saved for a rainy day and if the business fails you will probably be in immense debt and got nothing out of the business.

Granted, the balance between growth and cash flow is a tenuous one but it is one thing you should never defer to someone else in beginning. Plus, there is a difference between creating a lifestyle business and an enterprise. A lifestyle business is really making enough money for yourself and having some contractors or 1-2 people that gives you a good salary but is more about freedom. An enterprise is a business that scales and gets big over time but you will be working intense amounts in the beginning but will need to hire those smarter than you with the intention that you are looking for an exit and will have time for freedom when you cash out.

So when you are growing the business you should work the first 6-12 months paying off the initial capital expenses and getting about 6 months of cashflow for yourself before you hire anyone else. Once you have that done, start paying yourself something, even if it is small and will ramp up over six months, pay yourself first. This will get you in the habit of being committed to making the business pay for itself and you so you are not worrying about living month to month and let you find some resources to help you deliver while you continue to sell and grow the business.

Once you are looking at hiring someone use these two rules as a starting basis:

- Have six months of payroll for that person in the bank on top of your salary

- Have 90 days of projects or sales committed for that person to deliver so they not only have something to do but are earning their keep.

So I hope I got my point across on this one. You might have to be conservative at first in your growth but in the end you will scale better and create a business that is focused on delivery and customer service without putting you and your employees on a cash flow roller coaster.

What have been your experiences in starting up? When did you start paying yourself? Do you agree with my conservative approach? Did you do something different?

I look forward to hearing from you.

Since the Business Plan series came to a close I thought of the next logical step in what you have to do in your business to support the business plan and its operations.

This next step is the marketing plan.

Logically, your CMO or VP of Marketing would be in charge of this effort but in many startups you don’t have someone in that position so it is probably you with the ultimate responsibility. So my dear reader, I am here to the rescue to guide you through very important part of executing your overall business plan. Each one of these headings will generate one or more posts so here is an overview of what you can expect.

SUMMARY

Describe product or service. Emphasize unique or innovative features and/or protection by patent,
copyright or other legal means.

SITUATIONAL ANALYSIS

Situational Analysis lays out the overall marketplace you are competing in and the various environments your business will have to address.

The Market

The market is a description of your total potential market (your potential customers). It will also address how your product/service satisfies the needs of this market. You will also need to describe the particular customers that you will target. This includes the size of (1) total potential market (number of potential customers), and (2) your target market. Here you will have to support your estimates with factual data. It must also discuss the growth potential of (1) total potential market, and (2) your target market. You will have to look at local, national and international markets. Support estimates with factual data. Lastly will be the market share you expect to garner.

The Competitive Environment

Here is where you will identify major competitors: name, location, and market share. You will also compare your product/service with that of your major competitors (brand name, quality, image, price, etc.). This leads to you having to compare your firm with that of your major competitors (reputation, size, distribution channels, location, etc.). You must address how easy is it for new competition to enter this market and what have you learned from watching your competition. Some important elements to include are how competitors’ sales are increasing, decreasing, steady and why.

The Technological Environment

Since every company these days incorporates some type of technology to be competitive, how is technology affecting this product/service? How soon can it be expected to become obsolete? And is your company equipped to adapt quickly to changes?

The Socio-Political Environment

One area that many marketing plans forget to address is the outer social-political environment that may impact your market potential and competitive edge. You will have to describe changing attitudes and trends plus how flexible and responsive is your firm. This will also include a list new laws and regulations that may affect your business an what might the financial impact might be.

Other

This section is open for other situational factors that will affect your marketing plan.

PROBLEMS AND OPPORTUNITIES

This is a wide open field and specific to each business. Here you will have state each problem or opportunity and what you will do about them.

OBJECTIVES

The objectives section are the milestones that you will achieve as you execute your business on a daily basis. You must state objectives in precise, quantifiable terms. (e.g. “To obtain a sales volume of 3000 units by the end of the fiscal year.”)

STRATEGY

At the high level, the strategy section addresses wow will you reach your objective? (New market penetration, expansion of market share, entrenchment, etc.). This will also address how you have taken into account the previously mentioned problems and opportunities, and the potential reactions of your competitors.

ACTION PLAN

With all goals in sight, there must be an action plan to meet those goals and objectives. How will you implement the above strategy? What is the quality, branding, packaging, modification, location of service, etc? How will you price your product/service so that it will be competitive, yet profitable? What will you do for promotion/advertising? What are your selling and distribution methods? How will you service the product?

FINANCIAL DATA

All of your plans must be supported by financial data that ties into the overall business plan financials. This includes sales projections for the next five years (optimistic, pessimistic, realistic), a Breakeven Analysis (See Appendix B), and monthly cash flow for Year 1, quarterly for Years 2 and 3.

APPENDICES

As in the business plan, the appendices are the data that would bulk up the core plan too much but are important to support your information.

Appendix A - Market Share

This includes market share data tables and more detailed competitive analysis data.

Appendix B - Breakeven Analysis

This is in support of the financial data section and shows how with your objectives met, when you will breakeven with the revenue goals and expenses detailed out and tied with the various parts of the action plan.

Appendix C - Cash Flow

As important as when you will break even, you must be able to show how, on a monthly basis, you will manage the cash flow to support the business and not sink it from an overly ambitious strategy and action plan.

Do you have any experience writing a marketing plan?

If any of you have experience writing a market plan, I would like to know what elements I might have missed and any war stories that will help other entrepreneurs learn from your experiences. Please use the comments and let’s get this conversation going.

Remember the blogger-PR fiasco last year? The one where Wired Editor Chris Anderson published a list of over 300 email addresses from PR flacks that pitched him unsolicited? It caused quite a stir. In fact, around here, it got the PR Roundtable going where Marshall Kirkpatrick, Cathryn Hrudicka, Brian Solis, Doug Haslam and the late Marc Orchant discussed the quandry of PR relations with bloggers. Yes, that incident.

Well, it’s happened again. This time, the “outage” has occurred on a publicly editable wiki and lists PR Firms.

It’s caused quite a stir.

The story, in a nutshell is that Gina Trapani, lead editor of Lifehacker got tired of being spammed by PR agencies send press releases and pitches to her personal email address, despite notices “everywhere” to pitch tips@lifehacker.com. So she published a wiki with agencies that have pitched her personal email address (later made it editable only with attribution) and provided details on how to filter that list through Gmail filtering.

The topic has now been floated by some in the PR industry who have their panties in a bunch over this thing, that a blacklist be created for bloggers. I’ve avoided the whole controversy until last night when Geoff’s lunatical rant pushed me over the edge.

In those comments, I welcome the concept of a blogger blacklist. In fact, I want to be at the top of that list. See, it’s not that I don’t want to be pitched. I do. But pitching should come from some sort of rapport or relationship, not simply because of social ranking in the blogosphere. Even if the criteria were based on status in a particular niche of the blogosphere that was relevant to the pitch, that would be much more palatable than cold call spamming in the name of public frikkin’ relations.

Please put me on this blacklist. In fact, can I start it for you? Done.

I hope and pray this keeps the riff raff out of my inbox. Riff raff includes PR professionals or agencies who have not taken the time to understand us as bloggers. They don’t take the time to read our blogs. To know our audience. They leave voicemails about super secret meetings associated with events that we’re not registered for in cities that we aren’t in. They send us form letters addressing us as Site Owner. They don’t pay attention to how we want to be pitched.

See the PR agencies and professionals that can pitch me any day of the week know me or have some kind of professional rapport with me. They don’t need a blacklist. They wouldn’t even know I was on the blacklist. They don’t need to.

Is this too much work? Maybe. Should PR people care? Probably. I mean, really… If you’re spitballing top tier bloggers hoping to get the vehicle for the message, then you probably don’t want to include those top-tier bloggers, the biggest complainers, the most vocal advocates for change, in that list.

Some bloggers, like myself, will put our own names on that list.

Putting away all the foofoo, let’s think about some practical solutions to this problem. I think it’s high time that the PR community finance the creation and support of a third party broker that would maintain the authenticity, privacy, trust and relationship with the blogging comunity. I’m talking about an OpenID sort of trust-based system that includes the trust-relationship management as well as a CRM tool/plugin-in for sending communications in a standardized way. This tool would provide the recipient a means of “opt out” as well as trust-based ratings, reviews, advocacy and management.

PR Agency A sends me a press release via the system. I approve and can either create positive feedback or abstain (neutral feedback). If Agency B pitches and I don’t want it, I provide a negative feedback item that stays on an Agency’s permanent record.

I will gladly work with PR firms to create this tool. I think it’s essential for the healthy relationship between bloggers who legitimately want or need to be pitched and PR professionals who need to make a living and want to do it in a constructive, productive, ethical and moral way.

In the meantime, this stuff is not going to end soon. Agencies need to recognize that. Jeremy Pepper rightly points out that training is not happening. Spitball pitches or pitches in a way non-conducive to blogger cooperation (Gina’s issue) will not help.

As much as I’m a blogger, I have a degree of communications savviness too. We all want this to work well. Let’s create the tools to do it.

A few weeks ago, I received an invite to Brightkite so I signed up, being the early adopter that I am. What I saw instantly resonated with me.

Before I get into the technical and usability “stuff” let me explain the resonance I had. first there was Twitter which blazed onto the scene with the concept of microblogging in 140 characters or less. Twitter challenged the status quo by being so simplistic that anyone could use it. The beauty of twitter was hidden to the average user, and is still largely missed by people who haven’t used it. The beauty was in the API which allowed people to utilize Twitter from their cell phones (over text message), via desktop clients, and allowed developers to create cool mashups such as Summize (a search tool for Twitter) or Politweets which monitors Twitter for candidate mentions and displays the timeline in a relevant way. In other words, Twitter’s simplicity was the greatest strength for “selling” itself to the masses.

What Twitter didn’t do was provide context to the flow. It is difficult to track conversations. It is difficult to send tweets to only a select group of people.

This is where Pownce showed promise. Pownce took the concept of Twitter and made it contextual. Groups were possible, so I could have “real life friends”, “internet friends”, or “PR bloggers”, for instance. Pownce added the ability to post images or mp3’s so I could share media with my friends. However, until recently, Pownce had no API and the API they do have now is too little, too late. There was no SMS integration so I couldn’t text my comments in while I was sitting in traffic on I-95. I was glued to a website, when I had other things to do, as opposed to having a client that just sat there in the background polling the service and letting me know when there was something important to read. Pownce has the high distinguishment of having the hottest developer, Leah Culver though, so that counts for something.

Brightkite has come along, and though in very early beta, they are building their service around making the service as accessible and easy to use for anyone. Therefore, the simplest of all APIs is text messaging, which Brightkite uses perfectly. The hitch here is a telco hitch. Verizon Wireless, according to Brightkite, cannot support Brightkite because the short code used for interacting, 80289, has not yet been approved by the carrier. Apparently, Verizon is building parental controls for their service to allow parents to restrict access to specific shortcodes and so are not approving anymore codes until that functionality is built. Those of us on Verizon continue to suffer.

However, mobile phone users (including Verizon Wireless) can interact with the service over email as well. Each user account is assigned a unique email address.

In addition to the limitations I’ve already listed, Brightkite is currently a US-only service. So Canadian and other non-US users have to use the email address route.

Brightkite operates primarily around a “Where are you now?” premise - which is different than Twitter which asks “What are you doing now?” Therefore, a primary action within the service is the “check in”. Check ins allow users to say “I’m at Starbucks in Columbia, MD” or “I am at Latitude and Longitude x and y” (think application development in the future with GPS integration on, say, an iPhone or Blackberry).

A lot of early adopters have complained some about the privacy issue here, and indeed it can be an issue. Largely, the specifics of where a person is is controlled by the user. For instance, a check in could be as specific as sending a message “@ 6490 Dobbin Center Way, Columbia, MD” or as generic as “@ Woodlawn, MD”. I use this tactic, for instance, when I check in. I will not give away exact location when I’m at home for privacy and protection reasons. However, when I’m out and about, I will almost always check in with an exact location.

In addition to these privacy options, users have the ability to set their “timeline” as public or private, similar to Twitter. By checking a “Trust User X” box when accepting friendship requests, you can designate with granularity who you want to see your posts, locations, etc.

Brightkite still has a long way to go. Some hurdles that need to be addressed are “threading” of conversations. Pownce does this well. Additionally, it’s a little difficult to respond to users.

I’d encourage a mirroring of the Twitter API. In other words “D user message” should send a private message to the user. “follow user” should send a friend request to the user being followed. “track terms” should give me the ability to see whenever anyone, regardless of friend status, mentions my tracked terms or phrases.

In addition, I’m concerned about the fact that the service is built on Rails. Twitter is the poster child for a bad Rails app, and history shows that, optimized to the extreme, Rails still doesn’t scale well.

Brightkite does provide the ability to cross post to Twitter and gives the user options for what, if anything, actually gets crossposted. However, the biggest complaint I hear from Twitter users is the Brightkite URL appended to every crossposted message. This is bad form, and subtracts from the same 140 character limitation that Twitter enforces.

Largely, I think Brightkite could be a killer app. It does everything that Twitter does well and expands on it by taking some of the better features from other services. But Brightkite is not really about being a “me too” service as much as it is about solving the problem of location. I see the possibility of a mashup service, or a partnership, with activity based companies like WhyGoSolo (no inside knowledge of whether these two are actually seeing this as well).

As a bonus, and if you’ve read this far, I have 10 Brightkite invites to give away for the first 10 commenters requesting one.

Leah Culver Photo courtesy of Tantek, Used under Creative Commons

As you all know I just wrapped up my Business Plan Series and will be starting a Marketing Plan Series next week.

So I started thinking about what smaller bits of advice I could organize in a great ongoing series of posts. This is where I came up with “Rules for Entrepreneurs”.

These rules will range from how to hire lawyers, leveraging PR the right way, setting up your first site, how and when to hire your first sales person, putting together your sales/venture pitch, etc.

I would welcome from all of you requests for how-to’s that will help me provide you and the rest of Venture Files readers with the rules that will guide you through building a successful company.