How to Build a Company to $1 Million in Sales

Presented By

Ryan P. Allis, CEO of Broadwick

Author of Zero to One Million

November 4, 2006Collegiate Entrepreneurs Organization

Chicago, IL

What I’m Going to Talk About

• My Story• Ten Steps to Building a Company to $1 Million in

Sales• Figuring Out What to Sell• Finding Partners• Evaluating Ideas• How to Raise Money• Scaling the Company• Five Principles for Entrepreneurial Success• Finding Your Passion in Life

My Story• An 11 year old on the west coast of Florida

teaching people how to use their computers;• A 14 year old with a web site design firm;• A 17 year old VP of Marketing of a company

that went from zero to one million dollars in sales;

• A 19 year old author, co-founder of a software start-up;

• A 22 year old CEO of a 40 person company doing $4.1 million in annual sales

My Two Companies

• Web-based Email Marketing Software

• Makes it easy to create, send, and track email newsletters, surveys, and RSS feeds.

• Based in Durham, NC

• Delaware C Corporation

• Raised $500,000 investment in May ‘06

• 6,700 customers

• 37 full-time employees, 3 part-time

• $1.3 million in 2005 sales

• Annual run-rate of $4.1 million in sales

• Web Marketing Consulting Services

• Helps companies grow their online sales

• Based in Durham, NC

• North Carolina S Corporation

• No investment to date

• 25 customers

• 9 full-time employees

• $350,000 in 2005 sales

• On track for $400,000 in 2006 sales

The IntelliContact Team

Ten Steps to Building a Company to $1 Million in Sales

1. Find Your Core Motivation2. Decide What to Sell3. Evaluate Your Idea4. Decide on Entity Type5. Raise Funding, or… Bootstrap6. Develop Your Marketing & Sales Strategy7. Build Your Team8. Become a Good Manager9. Build Strong Systems10.Scale the Model

Find What Motivates You1. Desire for Money?2. Desire for Influence?3. Desire for Recognition?4. Desire to Create a Product?5. Desire to Create Jobs?6. Desire to Play the Game?7. Desire to Change the World?

STEP 1 – Find Your Core Motivation

Let’s just assume reincarnation doesn’t happen. One day you will be dead. And in your place you will have left something. What will that something be? How will you be remembered? What impact will you make? What will you create that continues on after you are gone?

Find Your Motivation. Find Your Passion. Passion is what gets you out of bed every day excited about the day ahead of you.

Why I’m Doing ItWhy Do I Do It? Five reasons:

1. I love the game.2. I like being able to provide jobs and give back to the community.3. I enjoy being part of a team that is creating a product that helps

over 6500 other businesses.4. I like the concept of being financially secure and the

opportunities, experiences, and influence that come along with having money.

STEP 1 – Find Your Core Motivation

Reason 4

STEP 1 – Find Your Core Motivation

Why I’m Doing ItWhy Do I Do It? Five reasons:

1. I love the game.2. I like being able to provide jobs and give back to the community.3. I enjoy being part of a team that is creating a product that helps

over 6500 other businesses.4. I like the concept of being financially secure and the

opportunities, experiences, and influence that come along with having money.

5. I’m passionate about changing the world on a global scale by working toward reducing poverty in developing nations and feel entrepreneurship is the best way I know how to earn money and gain influence so I can give back later.

What will be your core motivation?

STEP 1 – Find Your Core Motivation

Deciding What to SellFour Tips for Coming Up with Business Ideas:

1. Continuously be aware of the products you use everyday. How can they be better? What need or pain do you have that could be fulfilled by a product or service that is not currently being provided?

2. Go to networking events, seminars, and conferences like this one. You may find someone with a good product or a good idea that is looking for partners. Read magazines and publications that cover the industry you are interested in.

3. Intern or get a job at a company in the industry you are interested in. Work there to get experience and build contacts. Many times you will see product ideas in the course of your work that your company will choose not to pursue.

4. Find a partner with a business idea that you can join up with.

STEP 2 – Decide What to Sell

Product/Idea EvaluationTen Key Questions to Evaluation Your Product or Idea

1. Does this product or service fulfill a real need?

2. Is the need that this product fulfills worth the price you plan to charge?

3. Does the product increase pleasure, increase utility, or reduce pain?

4. How valuable are the benefits the product gives to the customer?

5. Must the product be reordered?

6. Can it be obtained or produced for a low cost so as to support a high margin?

7. What is the current demand for the product?

8. Is this demand expanding?

9. How many other competitors are selling the same or similar product?

10.What are the sales figures of these competitors?

Product/Idea Evaluation

STEP 3 – Evaluate Your Idea

Which Type of Company?

Key Questions to Ask Yourself About Entity Structure

1. Will I need to raise funding?

2. Should I incorporate the business?

3. If so, which type of entity should I choose?

STEP 4 – Decide on Entity Type

Should You Incorporate?Incorporation has many benefits. The three most important are:

1. Reduction in personal liability

2. Tax advantages (pay taxes on net income not gross income)

3. Prospects, suppliers, and investors will think you’re for real

If you intend to take your business seriously, get incorporated.

Other Considerations:

• S Corp vs. C Corp

• Location

• Cost

STEP 4 – Decide on Entity Type

Raising Funding: Debt vs. Equity

The first step is to determine if you will need outside money to get your business going. If you do, you have to determine how much is needed and decide whether to seek debt financing or equity financing.

With debt financing, your company is loaned money that it will have to pay back over time with interest. Main sources are family and friends, your own contacts, and the bank. If you qualify, the SBA can be a big help with loans.

With equity financing, your company is given money it will not have to pay back in exchange for percentage ownership in your company.

Current value of company (Pre-Money Valuation) : $40,000

Investment Amount: $10,000

% You Own After Investment: 80%

% Investor Owns After Investment: 20%

Calculating ownership percentages:

STEP 5 – Raise Funding or… Bootstrap

Where to Get the Money

If you’re looking for…

If you’re looking for You’ll most likely get it from

$1,000 to $25,000 Friends, family, your contacts, bank loans

$25,000 to $250,000 Angel investors, bank in some cases

$250,000 to $1 Million Group of angel investors, Small VC Firms

$1 Million+ Venture capital firms

A Tip on Raising VC:

What’s the most important thing I can tell you about raising venture capital?

A. Don’t send in an unreferred plan!

STEP 5 – Raise Funding or… Bootstrap

Bootstrapping & Growing Organically

It is certainly possible to create a successful company without any initial investment other than time and energy. This is often the only option available to young entrepreneurs. Here’s what you can expect if you go this route.

1. Be prepared (and able) to work 70+ hour weeks for a year or more without any salary.

2. Be prepared to wear multiple hats including CEO, CFO, COO, VP Marketing, VP Business Development, and Chief Executive Janitor

3. Be prepared to offer ownership in your company to other team members until you can pay them a market salary

4. Be able to look at creative ways at getting legal and accounting advisors to provided discounted help including offering them a small piece of the pie.

STEP 5 – Raise Funding or… Bootstrap

MarketingWhile marketing can be complex, the basics ofmarketing are simple! Here are the key questionsto ask:

1. Who is likely to buy my product or service?

2. Where do these people look for products or services like mine?

3. How can I get in those places?

Then get in those places.

STEP 6 – Develop Your Marketing & Sales Strategy

Marketing & Sales StrategyIt doesn’t matter how good your product or service is if no one knows about it.

Ten Questions to Get Started on your Marketing and Sales Plan

1. How will the product be sold? In a retail store, online, by direct mail, by catalogs, by infomercials, through distributors, or by a combination?

2. Will you sell your product at wholesale, at retail, or both?3. Is your main market businesses or consumers?4. Where do customers go to look for the product? 5. How can we be positioned so that we’re in these places?6. Could the price point support a telesales force?7. Could the price point support a direct sales force?8. What is my unique selling proposition? What will make my product so

different that customers will buy it rather than competing products?9. What do I want my brand to stand for?10.Do I want to have a low price, competitive price, or high price strategy?

STEP 6 – Develop Your Marketing & Sales Strategy

Building a Web Positioning Strategy

Selling a product online can be a great way to reduce costs and have your product exposed to a large market. Start by building your web site, getting a merchant account, and getting a shopping cart or order form running. In terms of positioning your company and product online, there are four areas to look at:

1. Search Engine Marketing

2. Email Marketing

3. Affiliate Marketing

4. Online Advertising (CPC & CPM)

STEP 6 – Develop Your Marketing & Sales Strategy

Building Your Team

Initially, it might just be you or you and a partner. As your company grows, you’ll need to hire staff to help you. If you never hire anyone you’ll be doing all the work yourself and be creating a job rather than a business.

I look for three things when evaluating candidates:

STEP 7 – Build Your Team

1. Experience in the related areas

2. Communication skills

3. Ability to take initiative

Becoming a ManagerOnce you have employees, you will have to learn how to manage them.

1. Have a Vision and Communicate It. 2. Show Respect. 3. Share Your Success. 4. Don’t Be Too Serious. 5. Work With Your Employees. 6. Have Your Door Open. 7. Listen.8. Build Relationships. 9. Commend More Than You Criticize.10. Reward With Praise as Well as Salary.

STEP 8 – Become a Manager

Ten Tips for Being a Manager

Building SystemsInvestors invest in systems. Just as a human body is made up of a number of different systems, so is a healthy business. You will need to put in place systems in the following areas:

• Human Resources• Billing• Marketing• Product Development• Employee Training• Accounting

But what are systems? They are just formalized rules, policies, and procedures that trained individuals are able to repeat time and time again as your company expands.

Key Question: Will your business be able to make money while you sleep? All highly successful businesses do.

STEP 9 – Build Systems

Scaling the ModelOnce you’ve found a business and sales model that works, think about how you can scale it. If you’ve been able to build your company to this point without outside capital, now may be a good time to get some outside capital and put your foot on the accelerator.

Five Ways to Scale Your Business

1. Set up sales offices in other areas and expand the business in those locations.

2. Either find partners or set up new offices overseas.

3. Considering franchising your business if applicable.

4. Bring on better talent that may have additional knowledge on how to open up new routes to market.

5. Expand spending on advertising efforts that have shown to be effective.

STEP 10 – Scale the Model

Where’s the Exit?

A company can exit in just four ways:

• Get bought by the general public by having an initial public offering

• Get bought by or merge with another company

• Have an orderly shutdown in which all creditors & employees are paid

• Go bankrupt

If you’ve been able to create a successful company with paying customers, an in-demand product, an experienced team, and solid systems you’ll be well on the road to reaching the $1 million mark in sales. Although this is a worthy goal, the end goal for many is an exit event which may take quite a few years longer to reach.

For many entrepreneurs with high potential businesses, being acquired or going public is the end goal. It generally takes at least five years to reach this point, although the time can be less in certain situations.

STEP 10 – Scale the Model

Some Final Words of Advice

1. Being an entrepreneur is not for everybody. But if you find it for you, and you can find a way to succeed, it is extremely rewarding.

2. If you presently do not have the financial resources, the experience, or a business idea, intern at or get a job in an industry you are interested in or find a partner who has what you’re missing.

3. Always focus on building relationships and expanding your network.4. Remember that it’s half what you know and half who you know.5. Don’t be afraid of failure or mistakes.6. Get out there and do it. Take the initiative and have a bias toward

action. Get experience however you can, have confidence, and be in it to win.

7. Life is too short not to be doing something your not passionate about. Find your passion and pursue it.

8. Be different. Think Different. Do Different.9. Write down your goals and frame them. Aim high. Follow-up monthly.10. Get started today.

For more information visit…

• Personal Web Site & Blog: www.ryanallis.com• Entrepreneurship Resource: www.zeromillion.com• IntelliContact: www.intellicontact.com • Virante: www.virante.com

• Or Facebook Me – Ryan Allis at UNC Chapel Hill

For More Information

Recommended Books• New Venture Creation by Jeffrey Timmons• Zero to One Million by Ryan Allis• Zero to IPO by David Smith• Rich Dad Poor Dad by Robert Kiyosaki• Rich Dad’s Guide to Investing by Robert Kiyosaki• The Tipping Point by Malcolm Gladwell• The Anatomy of Buzz by Emanuel Rosen• Think and Grow Rich by Napoleon Hill• The Seven Habits of Highly Effective People by Stephen Covey• How to Win Friends & Influence People by Dale Carnegie• The Lexus and the Olive Tree by Thomas Freidman• Reinventing the Bazaar by John McMillan • The Commanding Heights by Daniel Yergin

Product/Idea Evaluation

MAR Model for Opportunity Evaluation

MARKET ADVANTAGES RETURNNeed Barriers to Entry Investment Needed

Pricing Cost Structure Time to Breakeven

Market Structure Intellectual Property Expected Profitability

Market Size The Team Exit Strategy

Timing Business Strategy Expected Investment Return

STEP 3 – Evaluate Your Idea

Sections of a Business PlanIf you’re looking for any substantial amount of money, you’ll need a business plan. Here are the sections that would be in a usual business plan:

• EXECUTIVE SUMMARY

• THE PRODUCT OR SERVICE

• BUSINESS STRATEGY

• USE OF FUNDS

• MARKET OVERVIEW

• MARKETING PLAN

• CHALLENGES & RISKS

• THE TEAM

• COMPANY PERFORMANCE TO DATE

• APPENDIX A – REVENUE, PROFIT, & BREAKEVEN PROJECTIONS

• APPENDIX B - MONTHLY BUDGET FOR NEXT 12 MONTHS

• APPENDIX C – QUARTERLY BUDGET 3 YEARS OUT

STEP 5 – Raise Funding or… Bootstrap

Finding Your Passion

“Let’s just assume reincarnation doesn’t happen. One day you will be dead. And in your place you will have left something. What will that something be? How will you be remembered? What impact will you make? What will you create that continues on after you are gone?

Life is way too short to be mediocre, to be average, to be bland. Stand out. This is the time you have to make your mark in history. To change an industry. To change the world. Believe that you will achieve whatever goals you set. Let passion infuse every single area of your life.”