BizzBangBuzz by deal attorney & business lawyer, Anthony Cerminaro

3/31/2006

Free Data Security Kit for Small Businesses

"An IDG News report yesterday announced the availability of a free Better Business Bureau (BBB)customer data security kit through their 'Security and Privacy -- Made Simpler' website that was launched on Monday (3/27) for the benefit of small businesses, that typically do not have the resources to have a full information security program. The report contained some interesting statistics:

56% of U.S. small businesses experienced data breaches in 2005.
20% of small businesses do not use virus-scanning software for email.
60% of small businesses do not protect wireless networks with encryption."

Read more and find links at this Realtime-ITCompliance post.

Software Patents & Startups

"No one will sue you for patent infringement till you have money, and once you have money, people will sue you whether they have grounds to or not. So I advise fatalism. Don't waste your time worrying about patent infringement. You're probably violating a patent every time you tie your shoelaces. At the start, at least, just worry about making something great and getting lots of users. If you grow to the point where anyone considers you worth attacking, you're doing well.

We do advise the companies we fund to apply for patents, but not so they can sue competitors. Successful startups either get bought or grow into big companies. If a startup wants to grow into a big company, they should apply for patents to build up the patent portfolio they'll need to maintain an armed truce with other big companies. If they want to get bought, they should apply for patents because patents are part of the mating dance with acquirers.

Most startups that succeed do it by getting bought, and most acquirers care about patents. Startup acquisitions are usually a build-vs-buy decision for the acquirer. Should we buy this little startup or build our own? And two things, especially, make them decide not to build their own: if you already have a large and rapidly growing user base, and if you have a fairly solid patent application on critical parts of your software."

So states Paul Graham and much more in his essay Are Software Patents Evil? that is well worth reading.

Business Plan Template

This Business Plan Template from e-magnify "is taken from the Center for Entrepreneurial Assistance's 'Entrepreneur's Guide - Starting and Growing a Business in Pennsylvania' and was used for the 2002 WriteIdea contest, Southwest Pennsylvania's first business plan competition for women."

Don't Blame the VC; It's Your Fault

"The fundamental reason that only 2% of start-up business can attract professional investment is that the majority of entrepreneurs don’t understand how to properly structure a business or understand the investment process. Most of the new ventures that don’t get funded are due to:

* A belief that an Idea or a Technology + Capital = Success.
* An inability to understand the difference between an idea and what it takes to execute that idea into a revenue-generating business.
* The ignorance of not recognising that the funding process is structured to mitigate foolish risks and flesh out the criteria for success.
* The lack of communication and presentation skills.
* Unwillingness by the entrepreneurs to make an investment in developing the required skills to meet the critical success factors and adjusting their attitude to work in partnership with investors.

There are some fundamental rules successful investors, be they angels or VC’s, have in their bible. Investors who don’t always follow these rules are family, friends and fools.

Rule No 1
The idea is worth only 20% of the value of the venture...

Rule No 2
People – not ideas technology or money - build companies, thus they are worth 50% of the value of the venture...

Rule No 3
A successful and fundable business requires a sound structure right at the start, thus the structure is worth 30% of the value of the venture...

Rule No 4
Only products and services that can relieve a significant identified group of customer’s pains can generate revenue...

Rule No 5
Investors expect to exit with significant returns within six years...

Rule No 6
Strategies that are developed without total awareness of the forces and threats that can impact your business will inevitably fail..."

Read much much more in this excellent, comprehensive and pulls-no-punches article by Gerry Lemberg.

How a Start-up Evolves

"Businesses grow from start-up to conglomerate in three distinct phases, each of which is driven by a different type of person. The differences and conflicts between these waves of activity help explain why so many small companies self-destruct as they grow, and why so many large companies are so bad at doing anything new.

Chapter 12 of Robert X. Cringely's Accidental Empires gives an excellent analogy between the growth of a company and a military operation. He talks about three waves of expansion, each with its own characteristics and each one driven by people with very different sets of skills.

The first wave to hit the beach when entering new territory consists of commandos. These are people who, in Cringely's words, 'Work hard, fast, and cheap.... Their job is to do lots of damage with surprise and teamwork, establishing a beachhead before the enemy is even aware that they exist.' Simply put, they create something out of nothing, turning an idea into a product. A commando can literally do the work of a hundred normal employees when they've got the right problems to work on. A start-up without commandos has nothing to sell.

The second wave consists of infantry, exploiting the opportunity created by the commandos. These are the people who turn a promising start-up into a profitable business with systematic development, manufacturing, and sales efforts. They provide structure to the company that allows it to grow beyond an activity shared by a half-dozen friends into a real business. As Cringely says, 'While the commandos make success possible, it's the infantry that makes success happen.'

The third wave consists of police. Once the business has grown into its market niche, the third wave is an occupying force intent on holding territory. Author Eric Raymond describes middle managers as "conservators of the stability of the organization," which makes the presence of middle management a clear indicator that the third wave has arrived. A middle manager's job is to say no to ideas that don't originate from on high, somewhere near the CEO. This prevents the enormous size of the company from tearing it apart..."

Read more in this Motley Fool article (free registration required).

Models for Managing Uncertainty

"In making strategic decisions under uncertainty, we all make forecasts. We may not think that we are forecasting, but our choices will be directed by our anticipation of results of our actions or inactions.

Indecision and delays are the parents of failure. This site from ubalt.net is intended to help managers and administrators do a better job of anticipating, and hence a better job of managing uncertainty, by using effective forecasting and other predictive techniques."

Topics covered in this comprehensive and detailed site include:

# Chapter 1: Time-Critical Decision Modeling and Analysis
# Chapter 2: Causal Modeling and Forecasting
# Chapter 3: Smoothing Techniques
# Chapter 4: Box-Jenkins Methodology
# Chapter 5: Filtering Techniques
# Chapter 6: A Summary of Special Models
# Chapter 7: Modeling Financial and Economics Time Series
# Chapter 8: Cost/Benefit Analysis
# Chapter 9: Modeling Advertising Campaign
# Chapter 10: Economic Order and Production Quantity Models for Inventory Management
# Chapter 11: Modeling Financial Economics Decisions
# Chapter 12: Learning and the Learning Curve
# Chapter 13: Economics and Financial Ratios and Price Indices
# Chapter 14: JavaScript E-labs Learning Objects

Hiring Your First Employee

Looking to bring your first employee on board? Need a refresher on legal issues involved in hiring? This article from entrepreneur.com will help you understand the legal requirements of hiring staff so you don't hit any rough waters down the line.

How to Sell Your Business

I created a Squidoo lens on How to Sell Your Business as a companion to the one I put together on How to Buy a Business. The steps outlined in the lens are available here, but with related links and resources set forth in the lens omitted.

The Only Certainty About a Forecast is that It Will Be Wrong

When used as a management tool, rolling forecasts have an edge over many other performance management systems. This excerpt from the new book Reinventing the CFO explains how to make forecasts realistic and effective stating:

"The purpose of forecasting is to inform decision making (to help shape future outcomes), not to predict the future. In reality, forecasting is necessary only because organizations cannot react instantly to changing events. That's why fast reaction is more important than (even accurate) prediction—because accuracy is rarely achieved. Indeed, the only certainty about a forecast is that it will be wrong. The question is by how much. Narrowing that variation comes from learning, experience, decent information systems, and ultimately, judgment....

That's why adaptive organizations focus less on annual budgets or long-term views and more on rolling views—usually rolling forecasts that always look twelve to eighteen months ahead. Rolling forecasts, if well prepared, form the backbone of a new and much more useful information system that connects all the pieces of the organization and gives senior management a continuous picture both of the current position and the short term outlook..."

Emerging Technologies to Watch

This special report from Technology Review identifies and discusses the following emerging technologies as having particular potential for impact on business, medicine or culture.

Comparative Interactomics
Nanomedicine
Epigenetics
Cognitive Radio
Nuclear Reprogramming
Diffusion Tensor Imaging
Universal Authentication
Nanobiomechanics
Pervasive Wireless
Stretchable Silicon

Question Your Beliefs

"Mistaken beliefs have power over you because you treat them as the truth. A belief is no more than a thought or opinion that's automatically treated as correct. In reality, they have no greater likelihood of being right than any other thoughts. But once we give them the label 'belief,' we convince ourselves they're different and must not be questioned. Whether they're our own beliefs, or ones we've accepted from others, or the commonly-held beliefs of the society in which we live, they aren't necessarily true - even if that's how we've come to treat them.

Question your beliefs constantly..."

Read more in this post from The Coyote Within.

Tricks of the Trade

This post from Be Excellent provides this list and related link from Business 2.0 of 25 tricks of the trade for everything from finding great employees to sparking creativity and even knowing when to pass on a deal.

1. Extreme Benchmarking. Compare everything you do against your rivals
2. Bad News Folders. Keep a constant eye out for trouble
3. Strategic Strategy Reviews. Turn going-through-the-motions meetings into no-holds-barred debates
4. A New Office Pool. Use prediction markets to tap hidden knowledge
5. The Tech Box. Create a lending library of ideas
6. Outside-In R&D. Bring in experts to help spark new ideas
7. Office Graffiti. Let workers speak their minds (brainstorm)
8. Surgical Visits. Seek brutally honest feedback from customers
9. The Contra Team. Appoint official devil's advocates to challenge the merits of deals
10. Equity as You Go. Take no stake until you earn it
11. The Chief Shareholder Officer. Head off shareholder trouble before it starts
12. Always-On Board Members. Get the directors out of the boardroom
13. The Corporate Beehive. Use office design to keep the queen in touch with the worker bees.
14. The Job Audition. Turn the interview process into an all-encompassing tryout
15. Peer-to-Peer Promotion. Let employees choose their leaders
16. The Shrink Shrinker. Reward workers for keeping their hands off the merchandise
17. The Anti-Star System. Determine pay using just two factors: Profits and seniority
18. The Pyramid Scheme. Use kickbacks--the legal kind--to attract executive talent
19. The Long Goodbye. Keep retirees in the labor pool
20. The Three-Minute Huddle. Start each day with a lightning-fast, all-hands briefing
21. Gainsharing. Pass cost savings on to those who achieved them
22. Open-Source Ad Campaigns. Let your customers do the marketing
23. Late-Night Recon. Turn employees into trendspotters
24. The "Just Looking" Badge. Neutralize your customers' worst fears
24. Phone Shopping. Become your own customer

Follow the Leaders

From this Random Thoughts from a CTO post.

When leaders make a mistake, they say, "I was wrong."
When followers make mistakes, they say, "It wasn't my fault."

A leader works harder than a follower and has more time;
a follower is always "too busy" to do what is necessary.

A leader goes through a problem;
a follower goes around it and never gets past it.

A leader makes and keeps commitments;
a follower makes and forgets promises.

A leader says, "I'm good, but not as good as I ought to be;"
a follower says, "I'm not as bad as a lot of other people."

Leaders listen;
followers just wait until it's their turn to talk.

Leaders respect those who are superior to them and try to learn something from them;
followers resent those who are superior to them and try to find chinks in their armor.

Leaders feel responsible for more than their job;
followers say, "I only work here."

A leader says, "There ought to be a better way to do this;"
followers say, "That's the way it's always been done here."

'Do Nothing' is America's Most Popular Estate Plan

"If you don't make a Will it doesn't mean that you don't have one - it just means that you didn't write the one you have. For those who don't write their own Will, there are intestacy statutes that say who gets what and how...'Letting the state decide may save the decedent a few hours of thinking through their exit plan, but it can be exceedingly costly and aggravating to those left behind. Ultimately leaving a will is a much better legacy than dying without one.'"

Sound advice and more from this You and Yours Blawg post.

Favorite Business Model

Fred Wilson's Favorite Business Model:

"Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.

Examples:

Skype – basic in network voice is free, out of network calling is a premium service

Flickr – a handful of pictures a month is free, heavy users convert to Pro

Trillian – the basic service is free, but there is paid version that is full featured..."

Strategic Planning FAQs

" 1. What is strategic planning?
2. What are the key concepts and definitions in strategic planning?
3. What are the basic steps in a strategic planning process?
4. What do I need to know before I start the planning process?
5. What are the individual roles in a planning process?
6. What's in a mission statement?
7. What's in a vision statement?
8. What is a situation assessment?
9. How can we do a competitive analysis?
10. What is a strategy and how do we develop one?
11. What should a strategic plan include?
12. How do you develop an annual operating plan?
13. How do we increase our chances of implementing our strategic plan?
14. Should I use an external consultant?
15. How do I use retreats in the planning process?"

Answers may be found in this article from Alliance for Nonprofit Management: Strategic Planning.

Public Speaking Tips

"As Jerry Seinfeld once noted, at a funeral, most people would rather be in the casket than giving the eulogy, since public speaking stresses people out more than death. But giving talks doesn’t have to be such a frightening affair...There are some simple steps that should help make public speaking a better experience - for both you and your audience.

Presentation format
Before you start planning your presentation, find out from the organizers how much time you have and what format they envision for your talk...

Audience
Get information about who will be attending your presentation...

Location
If you have the opportunity, take a look at the location before the time of the talk...

The take-away message...
Start out with this summary statement in mind and build your presentation around it.

Outline
Once you have an idea of your presentation’s main message, spend some time thinking about the structure of the entire talk...

Strong start
The first couple of minutes of your talk should be the most prepared and polished. You want to get off to a good start...

Motivation
Spend a bit of time up front talking about the inspiration and importance of your message...

Timing
Wrap up your talk on time. To achieve this goal, ask someone to give you time cues by indicating when you have five minutes left, two minutes and when you have run out of time. Once you get the last notice, you should stop talking...

Flexibility
Organize your talk and know it well enough to have the flexibility to skip certain parts or expand on others depending on the circumstances...

Confidence and enthusiasm
You have been chosen as a speaker because you know your topic. Make sure that you exude confidence during your presentation...Be sure to enjoy your talk and show your enthusiasm about the content...

Question-and-answer session
If there is a Q&A segment then be sure to keep a polite demeanor throughout. Thank people for their questions and feel free to praise them for good points. If you are not sure how to respond to a query then express your appreciation for the insightful comment and note that you will look into it.

Practice makes perfect
Practice the presentation a few times: more if you have less experience, less if you are a more seasoned public speaker...Don’t write out the material word-by-word and don’t plan on reading text...Memorize the structure of the talk and the outline, but not every word.

Contact information
Finish by giving the audience some contact information, including an email address and Web site when applicable...

Read more in this excellent article by Eszter Hargittai.

Getting to Yes in Agile Development

"Agile Development embodies good negotiation techniques. Good negotiation leads to better project outcomes.

Negotiation, meaning "discussion intended to produce agreement", is fundamental to every software project. Developers and customers must reach agreement on what the system is supposed to do. A wise agreement will define achievable goals and meet the users' real needs. How should we reach wise agreements? How should we reach agreements that create good outcomes for both parties?

There are excellent answers to these questions...in the classic book, Getting To Yes"Getting to Yes"...[by] Fisher and Ury...[who] call their approach "principled negotiation". It contains four key elements:

*Separate People from the Problem
*Focus on Interests, not Positions
*Invent Options for Mutual Gain
*Use Objective Criteria"

Each is explained in "Getting to Yes". This article from AgileKiwi discusses just one - Focussing on Interests, not Positions.

Are Open Source Business Models Viable?

"The 'open-source' process of creating things is quickly becoming a threat—and an opportunity—to businesses of all kinds. Though the term at first described a model of software development (where the underlying programming code is open to inspection, modification and redistribution), the approach has moved far beyond its origins. From legal research to biotechnology, open-business practices have emerged as a mainstream way for collaboration to happen online.

New business models are being built around commercialising open-source wares, by bundling them in other products or services. Though these might not contain any software “source code”, the “open-source” label can now apply more broadly to all sorts of endeavour that amalgamate the contributions of private individuals to create something that, in effect, becomes freely available to all.

However, it is unclear how innovative and sustainable open source can ultimately be. The open-source method has vulnerabilities that must be overcome if it is to live up to its promise...

Read more in this article from Economist.com.

Venture Capital Term Sheet Provisions

This is a link to Brad Feld's term sheets series of posts. Topics covered:

Price, Liquidation Preference, Board of Directors, Protective Provisions, Drag Along, Anti-Dilution, Pay-to-Play, Dividends, Redemption Rights, Conversion, Conditions Precedent to Financing, Vesting, Information Rights, Registration Rights, Right of First Refusal, Voting Rights, Employee Pool, Restriction on Sales, Proprietary Information and Inventions Agreement, Co-Sale Agreement, Founders Activities, Initial Public Offering Shares Purchase, No Shop Agreement (also Unilateral or Serial Monogamy), Indemnification, Assignment