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Startup Flight Checklist Item #11: Hiring and Managing People December 27, 2011

Posted by Jim Price in Business, Entrepreneurship.

Once again, let’s remember that our purpose with this checklist is to keep the launch of our new business as simple and inexpensive as possible by leveraging existing, easy-to-access infrastructure.  In that spirit, let’s look at the arena of human resources.

The Advantages of Outsourcing and Contractors

As your startup business expands beyond just yourself (or you and your cofounder/partner), you need to decide, as you add more people, whether those functions, in the near term at least, can be outsourced.  For instance, do you really need to hire a full-time bookkeeper, or can you outsource that to a freelance bookkeeper/accountant for 4-6 hours a month at first?  Do you really need to bring on that full-time marketing person, or can you retain a small marketing firm, or hire a freelancer or contractor for a few hours a month instead at first?  Is that web development task going to be an ongoing need, or will it be a one-time task you might better address with a short-term contractor rather than a full-time employee?  Can you have your product orders packed and shipped by an outside company on an as-needed basis – perhaps more cost-effectively and with better quality control than by hiring full-time people who would be sitting idle when there’s no packing and shipping to be done?

Outsourcing and hiring contractors in this way offers you several important benefits as an entrepreneur:

  1. It enables you, even as a tiny business, to surround yourself with deep domain expertise at a fraction of the cost of hiring full-time experts in each function.
  2. At least in the short run, you can avoid the hassles of setting up all the human resources (HR) infrastructure such as benefits, payroll, tax withholding, etc. that you’ll need to do when you hire fulltime people.
  3. While a given contractor’s services may cost you more per-hour than an internal employee – they, after all, have to charge enough to cover the costs of their own benefits and marketing their services to people like you – you can scale up a contractor’s involvement by a few hours a month as your company grows, rather than needing to consider hiring an entire additional person.
  4. The cost to your business of an outsourced function is a variable cost – as opposed to the fixed cost of a salaried employee – making it a much more painless proposition to scale back expenses if that becomes necessary.

Things to Consider When You Bring on  Full-Time Employees

As your business continues to grow, it will probably make sense at some point to bring on certain people as full-time employees.  At that point, you need to understand that you are taking on a number of human-resources (HR) related legal responsibilities.

There are Federal employment and tax regulations to adhere to, and employment law and tax law also varies somewhat state-by-state.  But in general, as a business with full-time employees, you will need to pay attention to a new list of concerns, including (but not limited to) the following:

  1. Employee manual – required by state employment law, detailing all terms of employment, standard work hours, pay policies, policies and procedures, holidays, paid time off, discrimination policies, healthcare benefits, etc., etc.
  2. Employment agreements
  3. Confidentiality and non-compete agreements
  4. Payroll, including automatic deposit
  5. Tax withholding (Federal and state taxes)
  6. Payment of payroll withholding taxes
  7. Healthcare benefits
  8. COBRA mechanisms
  9. Retirement benefits
  10. Other benefits
  11. …and the list goes on…

Let’s say your small business is the type that, in order to expand marketing and sales, needs to hire representatives in different remote locations around the country.   (These days, that can be done pretty cost-efficiently by having your remote-office reps work out of home offices.)   In this scenario, you need to be aware that both employment law and tax policies vary on a state-by-state basis, so your business will need to accommodate that administrative complexity.

In general, whether your business has employees in one or multiple locations, I find that a good solution for almost any growing business is to consider third-party administrators, or TPAs, to assist you with specifying, setting up, and administering your human resources administration systems.  TPAs are often independent insurance brokerages – a great example is Kapnick Insurance in Southeast Michigan.

This type of firm, I’ve found, is great to work with for a small-to-mid-sized business because they are able to completely spec, outsource-handle and manage many of your HR functions, as follows:

  • Complete benefit plan analysis, design and ongoing administration;
  • Medical, dental, vision, life, insurance plans, etc., etc.;
  • 401k and other savings and retirement;
  • COBRA;
  • HR e-solutions online admin;
  • Ongoing employee communications;

Some TPAs will also advise you regarding setting up an employee manual.  (As insurance brokers, most will also quote handle your business insurance needs — which has nothing to do with this post — such as general liability, directors’ and officers’ insurance, etc.)  Because TPAs tend  to be  independent agencies, we as entrepreneurs tend to get competitive rates quoted on the various insurance carriers and plans, and working with a “TPA” (third-party administrator) obviates the need for us to go out and try to hire an HR director with expertise in seventeen areas (which no one person could reasonably possess).

Meanwhile, you can go through the cloud to set up and manage your payroll easily and inexpensively.  Consider going through Quickbooks/Intuit – or alternatively a vendor such as Paychex or ADP – with biweekly or monthly, automatic deposits into your employees’ bank accounts,  complete with the appropriate tax withholdings, along with your vendor making automatic payroll withholding tax payments to the appropriate agencies (the IRS or state tax authorities).  You can integrate the payroll transactions transparently with your company’s online bank account, and via the Internet with your accounting and bookkeeping system.


Startup Flight Checklist Item #10: Accounting and Finance December 19, 2011

Posted by Jim Price in Business, Entrepreneurship.

Now let’s take a look at Flight Checklist Item #10: Accounting and Finance.  As with every other element on our checklist, let’s keep our eye on the ball:  our purpose here is to keep things as simple and inexpensive as possible.

Because remember the whole point of the Flight Checklist: With the tech- and cloud-based tools and services available today, designing and launching a robust new business can be quick, easy and inexpensive.

Now, while as with any mature application space, accounting software has numerous full-featured competitive offerings, Quickbooks from Intuit is the dominant player and the class of the field.

A few very robust, stand-alone accounting app alternatives to Quickbooks include Sage Peachtree, Bookkeeper from Avanquest, Sage Simply Accounting Pro, and AccountEdge from Acclivity.  Quickbooks and most of these stand-alone accounting packages are available on a one-time purchase basis as well as (in most cases) in cloud-based forms

The following are the integrated functions you will look to accomplish with your small-business accounting software:

  • Setting up and maintaining your general ledger
  • Doing your daily bookkeeping
  • Accounts payable (A/P)
  • Accounts receivable (A/R)
  • Reconciliation between your books and your bank account
  • Financial statements
  • Budget management – plan vs. actual

In addition, with Quickbooks, you can electronically coordinate through Intuit to automatically manage payroll transactions with your bank, including automatic deposits for your employees and automatic handling of tax withholdings and payments to the appropriate government agencies, etc.

What you’ll typically find is that if you’re using Quickbooks, which has become very much of a small-business standard, it’s easy to exchange Quickbooks-formatted files with your part-time bookkeeper, account, tax preparation accountant, and so on.

An interesting alternative to Quickbooks or other stand-alone accounting packages is NetSuite, which is a cloud-based ERP (enterprise resource planning) application suite that includes ecommerce and CRM (customer relationship management) apps in addition to the accounting and financial apps, all integrated together.  This is far more to bite off for a brand-new startup than Quickbooks, and significantly more expensive than virtually any of the stand-alone apps.  However, if you think your startup is going to grow big fast, it’s worth a serious look to establish this kind of integrated infrastructure – still quite cost-effectively – from the outset.

Startup Flight Checklist #9: Direct Marketing December 11, 2011

Posted by Jim Price in Business, Entrepreneurship.

There’s both an art and a science to Direct Marketing, which most often takes the form of e-mail newsletters.  Not every business needs or wants a newsletter, but it can be a potent element of your marketing mix and a wonderful way to engage your customers.

Fortunately, there are a number of excellent, integrated, cloud-based software platforms that you can use to cost-effectively manage your direct marketing campaigns.  Some of the better ones include MailChimp, iContact, GetResponse, Campaign Monitor, LetterPop and Vertical Response.  In the opinion of many experts and veteran users, probably the class of the field is Constant Contact.

Each of these vendors provides you with easy-to-use, customizable newsletter templates, e-mail address management tools, and a number of high-level administrative functions  to automatically manage editing, auto-send, opt-in, opt-out, bounce-back, and a myriad of other administrivia that you won’t think of until you immerse yourself into producing a newsletter – at which point you’ll be awfully glad you’re using a pre-baked software platform created by direct marketing experts.

Each e-mail marketing software vendor offers its own tutorial, how-to video, set of tips and tricks, white paper, etc., usually tailored to its particular software platform.  There are also a number of excellent bloggers out there focused purely on direct marketing.  From a number of these experts – and from my own experience overseeing marketing functions – I’ve culled the following step-by-step advice for you.

1.       Decide on the Topical Focus of Your Newsletter

Figure out what you want to say.  Choose your topical focus based on your company’s brand and your team’s expertise, and stick to that focus.

2.      Brand Your Newsletter

What are you going to call your e-mail newsletter, and what will it look like?  E-mail should reflect your corporate brand and corporate design schema (look-and-feel).

3.      Create an Editorial Calendar

Decide how frequently you’re going to send out the newsletter.  It ought to be on a very regular, predictable schedule.  Before you launch it, you should have a good idea of what you’re going to write in the first six to twelve issues.  (In my mind, you might want to consider having a lot of the copy already written ahead of time.  After all, the topical content of business newsletters tends to be information we know in advance – we’re usually not talking about news reporting here.)

4.      Create and Maintain an e-Mail Address List

First, emphasize quality over quantity; there’s no prize for spamming folks who don’t open your newsletters.   Second, use a double-opt-in subscription system; in other words, have people opt-in, and send them a confirmation e-mail containing a link where they can confirm their opt-in status.  Third, avoid, mistyped e-mail addresses (for example, having people enter @gogle.com or @yahoo.cmo) by requiring retyping.  Fourth, delete all addresses that are bounced, as well as any readers that are consistently unopened.  Fifth, encourage subscribers to add you to their white list (preferred contact list). Sixth, offer links to “Unsubscribe” and your privacy policy.  Seventh, create viral marketing by offering “refer to a friend” button and a “Like” us on Facebook widget.  And eighth, to avoid triggering spam filters with ISPs, avoid use of words or phrases such as “sale,” “today only,” “free,” “act now,” “discount,”  “promotion,” and  so on.

5.      Create Compelling Content

First of all, you need to be sure that each issue addresses a topic that’s truly germane to your audience.  Assuming that, though, you need to get your busy subscribers to open and read each new issue of your e-newsletter.  So think carefully about what you say in your e-mail subject line – does it grab their attention?  Then be sure to lead with your very best material in a preview pane.

6.      Continue to Engage Your Audience

Be personable; being stiff just puts people off. Create a clear call-to-action in each e-mail.  Consider surveying your audience from time-to-time.  As I mentioned before, send your issues on a consistent, predictable timetable.  And avoid sending newsletters during holidays.

Startup Flight Checklist Item #8: Website Promotion December 6, 2011

Posted by Jim Price in Business, Entrepreneurship.

Checklist item number 8 for entrepreneurs is Website Promotion.  This is all about attracting Internet traffic – the right traffic – to your web presence, and by doing so gaining exposure for your products or services.  And ideally, generating sales leads and new customers.

How can you accomplish website promotion efficiently and inexpensively?   Through a mix of five complementary online marketing elements:

  • Search engine optimization (SEO)
  • Search engine marketing (SEM)
  • Social networking
  • Banner ads and other online advertising
  • Affiliate program promotion

If approached in a thoughtful, balanced way, an Internet marketing campaign for a startup venture can be remarkably effective at a very affordable price.  Let’s take a look at each of these five elements in turn.

Search Engine Optimization (SEO)

Search engine optimization (SEO) is a process of systematically adjusting your website in such a way that it ranks higher in “organic search” results in Google and other search engines such as Bing and Yahoo.  What are organic search results?  When you type a keyword – which can be a word or a phrase – into Google, three sets of results appear:

  1. The pink-shaded-box stuff at the top – those are paid ads, purchased using Google AdWords (see below)
  2. The stuff in the right-hand column – those are also paid ads
  3. All the search results below the pink box, that go for page after page – these are organic search results based on Google’s proprietary search engine algorithm

So SEO is a matter of researching and inserting the right keywords in your site to make you the most search-engine-friendly, building back links, creating fresh and appealing content, and overall ensuring high visibility with the search engines.  Site hosting services will provide a modicum of SEO service for a very modest monthly fee, independent services will provide more premium versions of the same, and marketing agencies know how to SEO-tune your site as well.

Search Engine Marketing (SEM)

Search engine marketing (SEM) really comes down to purchasing Google AdWords.  It’s a beautifully designed system for advertisers that’s really easy to use.  You write your ad, choose the keyword or keywords that are most related to your business – these are words or phrases that, when people search, you’d like your ad to pop up.  AdWords will tell you how much each keyword is on a per-click basis – they vary widely, so you can pick and choose, and narrow in on keywords that are very specific to your business.  For example, “jewelry” might be very expensive on a per-click basis, but “hand-made silver earrings” might be significantly less expensive.  Then, once you set up your ad plan, when people search for your keywords on Google, your ads will pop up.  If – and only if – a user clicks through to your site, you are charged the agreed-upon per-click rate for that particular key-word.  It’s all very transparent and low-risk, since you can monitor your Adwords plan in real time, adjust parameters, and cut things off that you feel aren’t working.

One cool thing to note is that AdWords can be tuned to just generate ads for online users in a local geography that you specify.  So if you’ve got an online presence for your sandwich shops in Decatur, Georgia, you probably only want your ads to show up on Google searches for folks who live in ZIP codes 30030, 30031, etc.

Social Networking

Perhaps the most crucial of these five is social networking links.  By providing standard widgets at the bottom of your homepage, you can encourage site visitors to spread the word regarding your products and services asking them, with a single click, to:

  • “Like” your site on Facebook
  • Follow you on Twitter
  • Add you to their circles on Google+
  • Follow your blog

The marketing leverage you gain by adding these links to your website can be significant:  users refer friends, who refer friends, etc.

Banner Ads and Other Online Advertising

In Checklist Item #4, we explored online advertising as a means to generate revenue for your business – using networks ranging from Google AdSense to AdBrite, 24/7 Realmedia, Chitika, and BurstMedia.  Flipped the other way – that is, not selling ad space on your site, but rather, advertising your site elsewhere on the web – can be a viable element of your online marketing mix.  Generally speaking, due to the expense, outbound, paid advertising is a marketing element that you may wish to hold off on if you are pinched for cash; the other marketing elements we’re discussing here are more cost-effective as baseline pillars of a startup online promotion program.

Affiliate Program Promotion

In Checklist Item #5, we discussed generating revenue through affiliate marketing.   So you get the gist of how these programs work: you can sign up to list other online merchants’ products for sale on your site, and when your site visitors click through to purchase, you receive a sales commission or finder’s fee from the merchant.

But let’s look at it from the flip side:  you can also consider using affiliate programs to promote, and drive traffic to, your website.  This approach is probably only appropriate if yours is an ecommerce-oriented site that sells consumer-oriented products.   But if you do have products for sale, a viable element of the online marketing mix is to join affiliate marketing programs.  If you’re a relatively small or unknown brand, you may wish to offer particularly attractive sales commissions to start, under the philosophy that any sales that affiliate partners might generate for you are likely to be sales you would not otherwise see.