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Newsletter Vol. 1 June 2009

LostJobStartBusiness.com Newsletter Vol.1 June 2009

Table of Contents

Foreword 7 Tips on Starting a Business After You Have Lost Your Job Employee Mentality Versus Boss Mentality Venture Capital - Why It's Probably Not For You Why You Shouldn't Contact Investors Directly

3 4 5 6 7

The "Right First Time" Or "Incremental Improvement" Strategy What's Best For You? 7 How to Get Investment For Your Business in a Recession 8

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LostJobStartBusiness.com Newsletter Vol.1 June 2009

Foreword
Welcome to the very first LostJobStartBusiness Newsletter. I intend to publish it every month. This edition contains articles on some important topics that hopefully will be helpful to first-time entrepreneurs. The articles have been written over the last month so you should find them relevant to the current business climate. It seems that every month, more and more people are losing their jobs worldwide. However, there is light at the end of the tunnel. I firmly believe that entrepreneurship is the key to economic recovery. There are lotʼs of skilled people without a job right now. Old business models have crumbled. There are massive opportunities out there for people to fill the vacuum with new sustainable business models. It only takes a few successful startups to kick start the chain reaction of economic recovery. Once someone is successful and moves on to scale their new business they will begin to employ people who have been victims of the current economic downturn. However, itʼs crucial to encourage enough people to be brave and go down the entrepreneurship route. I hope that LostJonStartBusiness.com can help with this. Recently, I have found myself spending more and more time on the website and have decided to make it my number one priority for the foreseeable future, In relation to this newsletter, I hope the design and layout donʼt bore you too much. I am not a graphic artist, so therefore, decided to go for the “uncluttered” look. Hopefully the content is interesting enough to pull this off. If you would like to get notifications when future volumes of the Newsletter become available simply leave your e-mail address in the subscription box on http:// www.lostjobstartbusiness.com. Fell free to drop me a line at info@lostjobstartbusiness.com Thanks and good luck, Feargal

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LostJobStartBusiness.com Newsletter Vol.1 June 2009

7 Tips on Starting a Business After You Have Lost Your Job
By Feargal Byrne 1) Change your mindset. It's natural for people who leave employment and start a business to carry with them some of the culture from their previous job. However, you must realize that you are changing gears. You are moving from being an employee to being a boss. You are moving from being a follower to being a leader. This requires you to make the appropriate mental adjustment. In many ways, this is the most difficult thing that you must do when starting your business. It's also one of the most critical. 2) Become fanatical about keeping your cash burn as low as possible. Cash is the oxygen for your business. As a start-up, you can't operate like a traditional established business. You must have enough cash to stay in the game long enough to learn from your mistakes. At the beginning, your business success depends heavily on how well you can reduce operating costs. There are some simple ways that you can do this. For instance, use Skype or another VOIP operator instead of a traditional land-line. Use free software such as OpenOffice and Google Docs. If you don't need office space then start up in your garage. By keeping your cash burn low you increase your scope for failure. In other words, you can have more rolls of the dice. After all, learning from your mistakes is the best way to learn in the real business world. 3) Get a part-time job. I know this is strange advice for anyone who is starting a business but hear me out. You need income to survive. You may have savings and a redundancy package but it's good not to eat into these too much. By getting another job you are providing yourself and your family with income until your business gets off the ground. There are also some good psychological benefits to this as well. Because your time will be limited you will become more productive in your business time. You will also not be forced to make rash decisions for your business due to financial pressure. That's right, it will help you avoid an "all in" moment. 4) Leverage the Internet. The internet offers the best value for you to promote your business. As a start-up you should be looking for early adopters in your market segment. The Internet is a great place to find these. Using social networks and participating in online communities is a great way to do market research and make early sales for a start-up. Every start-up should leverage the Internet as much as possible. 5) Realize that you must bootstrap and self fund first before you will get investment. This is particularly true in the current economic climate. Investors want to see traction. This is the most important thing. If you can bootstrap to early sales or even better, early profits you will find it much easier to unlock the door to investment. 6) Realize that you probably won't be an overnight success. It's important to understand that you are more likely to succeed if you approach your business from the perspective of making incremental improvements that will accumulate into ultimate success. 7) It's a bit like gambling. Making real world business decisions is really making educated guesses at what you think might work. A lot of the time your decisions won't work. It's important to test and measure each decision so you fully understand which ones work and which ones don't. This is the key to doing more of what works and less of what doesn't.
LostJobStartBusness.com Newsletter Vol.1 June 2009
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LostJobStartBusiness.com Newsletter Vol.1 June 2009

There are many other factors you should consider when starting your business. Much of them relate specifically to your industry niche. However, there are a number of mistakes that you can avoid making.

Employee Mentality Versus Boss Mentality
By Feargal Byrne I have noticed time and time again that when people who have previously been in employment "go out on their own" they seem to still carry with them the same culture as the organization that they have left. They wear the same clothes to work. They have a similar signature on their email. They still behave as if they are working for a multinational. These are the symptoms of the "Employee Mentality." It's important to change this mindset and move into the "Boss Mentality." No, I'm not talking about acting like Bruce Springsteen all the time. I'm talking about projecting confidence and controlling your own destiny. I'm talking about being decisive and accepting failure as the natural process of working out the best way to do things. An important lesson that I have learned is not to get bogged down in formalities. Formalities and start-up companies do not like each other, they will never get along and there is no point in trying to make them get along. Why is this? you ask. Well, speed of decision making and flexibility, in other words lack of formalities are competitive advantages for a small new business. Don't deny your new business these tools of success just because the company that you have previously worked for had formal processes and systems for almost everything. Remember, the only way to find out if something will work or not, is to try it out in the real world. Business in 2009 is different to business in 1999. It's also different to business in 2006. Business in 2010 will probably be different to business in 2009. It's changing and it's changing fast. You have to be super flexible. The businesses that are laying off workers right now, all have outdated business models and cost structures that are no longer viable. They can't adapt. The single biggest error you can make in starting your business is continuing your "Employee Mentality". You must change this. However, it's not easy. You have been living in that environment for the last number of years. It will take time to change your mindset. You need to acclimatize. However, it's important that you begin to take those incremental steps towards the "Boss Mentality." Now is the time for you to fulfill your potential by starting to drop the "Employee Mentality" and assuming the "Boss Mentality".

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LostJobStartBusiness.com Newsletter Vol.1 June 2009

Venture Capital - Why It's Probably Not For You
By Feargal Byrne The way that Venture Capital (VC) firms invest means that only a certain type of business is suitable for them to invest in. The theory goes like this, most VC investments fail, but the ones that do succeed cover the costs of the failures and give a healthy return. To use the boxing analogy VCs throw haymakers. Most businesses do not have the potential to generate the level of return needed for the VC investment methodology. As a first time entrepreneur, you need to start slow and build from the bottom up. Initially seeking VC funding is a bad idea in most cases. The chances of a reputable VC firm investing in a team of first time entrepreneurs are very slim. A better idea is to develop your business and seek a Business Angel if you need additional funding. The right Business Angel will really improve your business. The Business Angel will be invaluable in increasing your revenues, and hence, improving your chances that you will make a profitable exit. If your business does require further VC funding to scale, then having a successful Business Angel on your team is crucial. It's important to remember that the process of getting VC funding is expensive (for bootstrap entrepreneurs like us). You will have to pay for due diligence along with other legal and accounting fees. To put this in context, if you are smart, you will have to get personal legal advice which is separate to the legal advice for your business and you will have to pay for both. On top of this, you are at a major disadvantage when undertaking negotiations with VCs. They do this all the time, and you are only going through this process for the first time. Having an experienced Business Angel leading your side in the negotiations will greatly improve your position. Traction is the currency of private equity investment, both on Business Angel and VC levels. Accumulating traction is always a good idea. As a result, you need not be concerned with VC or Business Angel funding as long as you are pursuing traction with all your might. Look at it like this, investors look at your business as a money machine. It's up to you to be the engineer who builds that money machine. The more traction you have the better your negotiating position. Getting funding should not be the main focus of your business. Making a profit should be. If you do this, then any funding to help you scale will come naturally. However, it's difficult to bootstrap a business to the investment ready stage. These top 10 tips for start-ups (http://www.lostjobstartbusiness.com/top10steps.html) may help you along the way. It's a lot of hard work, but if you persist you will see the benefits and reap the rewards.

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LostJobStartBusiness.com Newsletter Vol.1 June 2009

Why You Shouldn't Contact Investors Directly
By Feargal Byrne This certainly applies to VCs. If you contact them directly or send in a business plan you are wasting your time. They rely on recommendations from attorneys, CPAs and trusted advisers. You have to go through these to get to the VC. Also, you will probably come into contact with a Business Angel through someone in your network. So the question is, how do you get recommended to potential investors? The answer is very simple. Be excellent at what you do. Forget spending your time on superficial activities and focus on developing the fundamentals of your business. Focus on the money engine. While seeking investment, the old adage is true - "if you build it they will come" but only if it's really good and can give great ROI. Instead of contacting VCs or Business Angels directly you should leverage both Web 2.0 and traditional PR to get their attention. It's a round about way, but a potential investor will be more interested in a business that they see getting positive reviews of it's products in industry magazines/websites than a business that sends in a business plan cold. Put yourself in their position. What would you be more impressed with? It's about creating higher social value for your start-up in investment circles. Investors don't buy into the hard sell and have seen it all before. The key to making your start-up attractive to investors is traction combined with a good industry sector buzz. If you can achieve both of these, then potential investors will find you some way or other. However, you should make it easy for investors to understand your business by having a formatted business plan on hand to show them. Check out http:// www.lostjobstartbusiness.com/bplanlayout.html where you can download a business plan template and watch a walk-through video.

The "Right First Time" Or "Incremental Improvement" Strategy - What's Best For You?
By Feargal Byrne When you start a new business you can fall into one of two categories. You can operate on the premise that you must be right first time or that you will rarely be right fist time, but you will use your initial decision as a marker dart for incremental improvement. This is the fundamental paradigm of strategic construction for start-ups. This is the DNA which your planning is built on. There are so many factors in determining which category entrepreneurs fall into. Social and educational backgrounds are important along with personal philosophy. Another major factor is culture bleed from an entrepreneur's previous workplace. This is perfectly natural, but in the context of new start-ups can be damaging. A culture that has evolved in the ecosystem of a multinational company will most likely be sub optimal in a start-up setting. It's like a fish out of water.

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LostJobStartBusiness.com Newsletter Vol.1 June 2009

A fundamental difficulty with the "right first time mentality" is that there is a significant danger of paralysis by analysis. In today's fast moving world an over emphasis is placed on stand alone scientific market research. However, in some cases where the purchase of expensive stock or when there is a requirement for a large initial capital investment such research is indeed needed. Conversely, in the context of web based/software development start-ups if you have the coding skills in house you can develop and promote you product and do market research hand in hand. This is known as Organic Market Research. Making incremental improvements is an essential function of start-ups. In my opinion, it's by far a better approach to strategic planning. You cannot learn from failure fast enough with the "right first time" approach. You are likely to give up too soon. However, if you accept that you will probably need to make a number of iterations for each of your decisions before they work, you have scope to learn from specific failures and build them into you future decision making process. You can only truly learn by letting your decisions play out in the real world. Therefore, the best way to develop as a business owner is to adopt the incremental improvement philosophy. Remember, you are not compartmentalized. Your product development, operations and marketing are all integrated. For further information on how to undertake organic market research while simultaneously developing and promoting your product check out http://www.lostjobstartbusiness.com/ marketing.html. It's important to remember that as a start-up entrepreneur your time and resources are limited. So therefore, you must focus on the most effective methods of getting results. You can achieve success by making incremental improvements over time with the added benefit of having a head start in the traction race on competitors that may be following the "right first time" approach.

How to Get Investment For Your Business in a Recession
By Feargal Byrne It's always hard to get investment for your start-up but in an economic downturn it's even harder. However, if you can develop a business that is successful during a recession the chances are that it will be even more successful during an economic up turn. Here are some straight talk tips that will point you in the right direction. 1) Traction is the key to getting investment. In a recession, start-ups must be further up the traction ladder. This means that you will have to bootstrap and self fund until you at least start making sales and even better generating profit. 2) Investment is to help you scale and not to help you start up. Particularly in difficult economic times, investment will only go to businesses that can use it to scale. 3) You shouldn't contact potential investors directly. This certainly applies to VCs. If you contact them directly or send in a business plan you are wasting your time. They rely on recommendations from attorneys, CPAs and trusted advisers. You have to go through
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LostJobStartBusiness.com Newsletter Vol.1 June 2009

these to get to the VC. Also, you will probably come into contact with a Business Angel through someone in your network. So the question is, how do you get recommended to potential investors? The answer is very simple. Be excellent at what you do. Forget spending your time on superficial activities and focus on developing the fundamentals of your business. Focus on the money engine. Send press releases and build a "published press release portfolio". This will help you get on investors' radar. 4) Spend your time building a business and not writing a 50+ page business plan for investors. You must have your own internal strategic roadmap but the mistake many entrepreneurs make is to write a complicated thesis style business plan for investors. This will actually discourage potential investors from reading your plan. Instead provide investors with a 10-15 slide deck in the form of a print out or PDF. Again, be aware that your traction slide is by far the most important.

About: LostJobStartBusiness.com is a new website that aims to help people who have recently lost their job to start a business. It was set up by Feargal Byrne. An entrepreneur who has experience in the software and entertainment sectors. He also holds a B.A. in Accounting and Finance and an M.B.S in Entrepreneurship and Marketing.

LostJobStartBusness.com Newsletter Vol.1 June 2009

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