Elana Fine, Managing Director of the Dingman Center recently participated in a live chat with the Washington Post’s Capital Business magazine for their Business Rx column answering questions from regional entrepreneurs on improving or starting a business. This post features some of the questions from the live chat. Follow the Dingman Center’s Facebook Page and Twitter Page for information on the next live chat and other Dingman Center news and events.
Q: A lot of buzz has been going around on the lean start-up methodology being applied in technology and other industries. How can first-time young entrepreneurs get their hands on training and implementing such methodology to their business ideas?
A: The best way to learn about the process is to talk with start-ups to understand how they determined their minimum viable product and how they determined when & how to iterate. As you start your business “leanly,” you have to also think about the decision points to iterate less and grow more.
Q: How can entrepreneurs get more involved in the local community? I would like to interact with our start-ups on an informal basis, but don’t know where to turn.
A: The D.C. tech community is thriving, with plenty of options for entrepreneurs looking to get connected. Organizations such as D.C. Tech Meetup and Foster.ly are providing great forums for entrepreneurs to meet. There are also new incubators such as The Fort and Acceleprise that bring in mentors to help with their companies.
Q: I have an idea for a specific niche service market to build an online/mobile business and I need to develop potential revenue projections. While I am realistic I still want to be optimistic for a 3-5 year time frame. Could you provide some advice for a framework?
A: The best frameworks is a bottoms-up approach — identify your revenue streams and growth assumptions for each stream, then show how they grow over time. For example, if you are going to win two customers in month one, six customers in month eight and 20 customers in year two — the projections should reflect that growth and revenue expectations per customer (or user, etc.) over time. Top down, taking a large market and making assumptions about a percentage of that market you can capture usually leads to significantly inflated projections and doesn’t show advisers or investors that you have given thought to how you will methodically grow your business. It is also important to think about the bottom line — what are expenses associated with generating that revenue? To quote one of my favorite lines from our investors this year, “Is the juice worth the squeeze?”
Q: I am launching a new mobile app and I will need additional capital (maybe $250,000) to help complete the next stage of development. I think angel investors might be the right fit, but what is the best way to approach them and get their attention?
A: In the current environment, the best way to get funded for a mobile app is to show that you have traction with users. Get a minimally viable product out there and show that you can reach your users and understand their needs. There are so many apps in the marketplace that it is hard to convince investors that you can break through the noise.
Q: What is the line between a hobby and a business? Is there a financial threshold that one must cross before having to deal with becoming a formal business? For example, if a friend knows I have my own personal Web site and offers to pay me to set one up for him, have I started a business?
A: I’m certainly not an accountant or tax specialist, but if someone pays you for a good or service you have provided, that is technically a business. A hobby would be if you liked to set up Web sites for friends for free.
Q: I’d like to start an interior design business. I believe in my talent, but I don’t exactly have a portfolio full of projects that I can show to potential clients since I am fairly new at this. What is the best way to get my foot in the door and start establishing myself?
A: Would you like to start at my house? All kidding aside, figure out what kind of projects you can do in your spare time for family and friends for free, and use that to start your portfolio. Even if it is a small room here and there, you can create the “before” and “after” shots to convince others of your talents.
Q: I’ve been working as a solo consultant to nonprofits. I’ve been courted by a consulting firm, which is attractive because they would handle billing, provide a training system for me to use with clients instead, and will help market me. On another level, I have some concerns: I would still have to get my own clients, they want exclusivity (so I can’t serve other clients on my own, without giving them a cut), and a non-compete clause (I’m prohibited from pursuing their clients if I leave, but they get a portion of my earnings for a year after I leave — because they have trained me). What advice do you have on weighing whether to remain solo or join a firm?
A: This is a really tough question and really depends on how important it is for you to have control over your company. You may be able to generate more business by being able to leverage other infrastructure, but you do lose independence and flexibility when you join with others. It sounds like you could probably continue with being a sole contractor and find other outsourced service providers to handle billing and training, without signing on with another firm.
Elana Fine was appointed Managing Director of the Dingman Center in July 2012, after joining the team in 2010 as Director of Venture Investments. As Managing Director, Elana’s primary focus is leading the Dingman Center in support of its mission and strategic plan. Key responsibilities include oversight of our student venture incubator, Dingman Center Angels investor network, business competitions, and technology commercialization efforts.