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Admit it. You’ve been daydreaming about that restaurant concept at the office. Pondering your boutique in the shower. Deliberating whether to finally buy that domain name on your drive home. Well, you’re in luck. Indy happens to be one of the best places in the country to hang your shingle. We gathered some of the city’s most inspiring entrepreneurs to show you how it’s done in six easy steps. Come on in—we’re open.
So how do you come up with a great idea for a business in the first place? Matt Hunckler, founder of the startup community Verge (2,000 members strong), explains. Start with lots of whitespace. I like to use whiteboards or giant sheets of paper, but you might find it easier to work at a computer. Next, remove all distractions. Find a quiet place and go offline (yes, even your cell phone should be turned off). Generating great ideas comes from building momentum. And how do you build that momentum? By reading, listening, and even tasting things that stimulate your senses. I like to build what I call a “swipe file” of miscellaneous cool things. Most importantly, resist the temptation to edit as you go. To get to the best ideas, you have to go through a lot of bad ones. So, capture them all. You can mine for gold after you’ve dug into the dirt.
Step 1: Validate Your IdeaBy Angie Hicks, co-founder of Angie's List
Almost 19 years ago, the services-review site co-founder fine-tuned an idea that today is worth more than $800 million. Before you do anything, Hicks advises, take time to grade your own business concept. People ask me all the time how we got the idea for Angie’s List. The truth is, it wasn’t my idea. And it wasn’t my co-founder’s idea, either. Angie’s List was actually modeled after a services-review site many Meridian-Kessler and Carmel residents will recognize: Unified Neighbors. That was Bill Corbin’s great idea. He had tested its validity and was executing his vision long before we came along.
Like a lot of great ideas, it was simple in premise: Find the best service companies in town, compile a list of them, and make it available to subscribers. To keep such a business going, though, you would need a way to keep it current with fresh, accurate information. And why not allow the best of the service companies to offer discounts to members so you can help customers find top-rated companies at a good price?
It was such a strong idea that many of today’s Angie’s List members came from that original group of subscribers. So how do you know if your concept is a solid one?
1. Ask yourself if your idea solves a problem lots of people have. You may have a design for the best catapult lever ever built, but not many people stand to benefit from that.
2. Is it a problem most people can’t easily solve? Let’s face it, finding qualified service providers is as much of a challenge today as it was in the 1970s when Corbin started Unified Neighbors.
3. Is there a way to monetize your idea? Angie’s List followed the old-school journalism model of charging subscription and advertising fees.
4. Can you attract and sustain a customer base? I started by knocking on doors. But my first step as chief marketing officer was to find other ways, such as home shows, advertising, and publicity.
5. Can you continue to deliver on your solution? The key to this is hiring the right people to carry out and improve on the initial idea.
6. Can you scale your solution and continue to deliver the same level of quality? We quickly grew to more than 200 markets, which some businesses aren’t ready for. If you can answer yes to these six questions, you’re on your way. There’s still a long road ahead, however. You’ll need money, a great team, and an expansion plan for when things go well. But it all starts with the right business concept. Often we think that validating our idea is a task with a start and a finish. I’m here to tell you that you never stop having to reevaluate it, how you execute it, and with whom you carry it to the next level.
Step 2: Write A Business PlanBy Amy Peddycord, founder of Invoke Studio
With an MBA from Columbia University, Peddycord was better qualified than most when it came time to write a business plan for her yoga studio’s second location last year. But even she sought help. Once you’re sure you have a good idea, it’s time to get everything down on paper. The outline below kept me focused on what to include and what to leave out. Although luck and improvisation may pay off in the short run, long-term successes are always built on planning. Writing an articulate plan is also the first step toward securing financing.
First, visit your competitors and outline your product. This can actually be fun. I researched yoga studios that I admired in Chicago and New York, then looked in Indianapolis-sized places like Columbus and Jacksonville, and finally came back home to scope out the local market. This is also a good opportunity to see how committed you are. People who can’t even bring themselves to plan a vacation around researching a prospective business might want to rethink their idea.
If you’re a born procrastinator like me, I recommend writing your business plan away from your home and work. When I wrote the plan for Invoke’s new location, I rented a cottage near Lake Michigan. I buckled down and banged out the plan unplugged and outdoors—Facebook updates, texts from mom, and Instagrams of pals’ lattes had to wait.
Regardless of where you write it, don’t be afraid to ask for help. There are many people who have passed this way before you and made plenty of mistakes to learn from. The Indy branch of Score (indianapolis.score.org), a nonprofit dedicated to helping small businesses, offers free mentoring to startups. Other entrepreneurs and friends may be good resources, too.
Although I have an MBA and should know how to create a financial model, the act of applying that education to actual brick-and-mortar reality was overwhelming. Knowing that I needed expert help, I hired someone in finance to help me create a sophisticated plan and ended up with one that I can use for years. Worth every penny. Investing in your business starts long before you’re actually signing a lease and hiring a staff. SECTION BY SECTIONPeddycord talks us through the poses of a basic business plan.Cover – Straightforward, in a conservative typeface. This is not a wedding invitation.
Executive Summary – Clearly state what you want from your investors. Don’t be coy and make them guess what you’re asking for.
Products & Services – So what is this business actually going to offer when you move beyond brainstorming?
Market Strategies – Once you’ve figured out what your business is going to do, how will you make people aware of it?
Competitive Analysis – Who else is out there doing what you do? What are they doing right? How are you going to do it better?
Strategy & Implementation – What’s the timetable for getting this thing off the ground?
Personnel Plan – Odds are, you won’t be going it alone. What’s your hiring strategy?
Financial Plan – Assuming you convince somebody to give you a few bucks, how are you going to spend them? And most importantly, when are you going to start paying people back?
Step 3: Get FinancingBy Trevor Belden, founder of The Ball & Biscuit
By day (and sometimes nights and weekends), the Faegre Baker Daniels partner helps clients acquire financing to start their businesses. In his spare time, Belden looks after his Mass Ave bar. Here, what he has learned about fundraising from both. Most of my law-firm work is spent on larger deals, but I make a point to set aside time for entrepreneurial clients. If they’re first-time entrepreneurs, they typically know how much they don’t know. But first-timers don’t always realize how many financing options there are. They probably don’t have an appreciation for how long it can take or the transaction costs involved.
Most people start out with friends-and-family money along with their own resources. Small Business Administration loans are great for a lot of reasons. They usually have reasonable terms: low interest rates and fees and manageable repayment schedules. Huntington and the Indiana Business Bank are two places in town that are prequalified to make SBA loans. If you go down that path, though, you have to provide a personal guarantee. The bank is going to want 100 percent of that loan back if the business fails, and if the business doesn’t have it, they’ll go after your personal assets. If the business does well, bank debt is by far the cheapest. Bringing in investors is more expensive—you’re going to end up paying them back a lot more. The flip side of that is that you’re not putting your assets on the line.
With The Ball & Biscuit, I originally intended to use only my own money and a few investors. I thought it would be useful to have those advocates who would bring their friends to the bar and get the word out. But as we got closer to opening, I thought, If I borrowed a little more, we’d have more security. Roughly 70 percent of the money I raised was from investors; the rest was the loan.
The art of fundraising is knowing the person you’re pitching and what approach is going to be best received. After that, it’s timing. If you’re asking an individual for money, did they just buy a boat and now they’re strapped? If it’s a venture fund, what is the hot trend everyone is chasing? A ton of it is just luck.
Most people starting a business try to put a value on the company and then sell a portion based on that value. But I don’t recommend that for businesses like The Ball & Biscuit. I tried to arrange the economics around what’s called an internal rate of return, so an investor can compare the IRR from this investment with the stock market or some other opportunity. My arrangement with my financial backers is that their ownership is silent—they don’t have any voting privileges or management control. I absolutely recommend that if you can get away with it. Once you take in a partner with a voting interest, there’s a great deal of unpredictability and the potential for headaches. In my case, I said that cash investors would be paid all of their money back before any distribution was made to me for my sweat equity. My goal was to achieve that in three years, and we did.
Having the right amount of financing is critical to a business’s survival. There are already so many risks and circumstances beyond your control (like whether someone will actually walk in the door and buy a cocktail). The last thing you want to add to that is the prospect of running out of money.THREE OTHER SOURCES OF CASHKickstarterThe website at the forefront of the crowdfunding movement remains the largest source of it. But you’re committing to giving away products or experiences to everyone who throws in money. kickstarter.com
LocalstakeFounded by three former investment bankers, this local site offers investment-style crowdfunding—in other words, you won’t have to knit any sweaters for the people who contribute. localstake.com
Business Ownership InitiativeOne of the largest microlenders in the region and a Chamber of Commerce partner, the BOI not only makes small loans (up to $25,000) but offers free lessons in accounting, management, and public relations—a mini MBA. businessownership.org
Step 4: Hire The Right PeopleBy Jeb Banner, co-founder of Smallbox
One of the most popular TEDx talks last fall at Hilbert Circle Theatre was Banner’s “Everything I Needed to Know About Business I Learned from Being in a Band.” From the Broad Ripple Web-marketing firm owner, a primer on how to recruit the right bandmates. The first handful of people you hire will, in many ways, determine your company’s success or failure. Here are a few things I’ve learned about hiring from starting a dozen businesses and nonprofits over the last 15 years:
1. Will Over Skill. People have to want it. They have to be obsessed. The best employees are ones who would do the work even if it didn’t pay. I know that seems ideal, but I think there’s a person born for every job. Not that skills don’t matter—just don’t get spellbound by a sexy resume. Which leads me to my second recommendation ...2. Ignore Resumes. Okay, maybe not entirely, but in my experience a person’s resume is nearly worthless. Pay close attention to the way they talk (Do they say “we” or “me”?), work they’ve done (Does it show growth?), and what others say about them (Are they part of a community?). Google is also a great resource. Anyone looking for a job in 2014 who doesn’t realize Google is their resume probably needs career coaching more than a job.
3. Hire Friends. Some people will tell you to never do this, but I think that’s silly. Friends can be some of the best employees and business partners. Also, when starting a new business, hiring friends may be your only option. They believe in you and are often willing to work long hours for little pay. 4. Try Before You Buy. When I was looking for an assistant last year, I sent four typical tasks to 20 applicants and offered them $100 each if they finished the tasks, regardless of whether I hired them. I thought for sure I would have at least half of them fall off since the tasks were no small amount of work, but all 20 finished them. I was out $2,000, but I also made the right hire.5. Remember, You Are the First Hire. An owner has to wear two hats. This can get confusing. As an owner, you must stand outside the business and look at it objectively. As an employee, you have to roll up your sleeves and get things done. So 95 percent of the time, you’re in employee mode. Take time weekly to step back and look at it as an owner—how is this company serving my needs? 6. Delegate, Delegate, Delegate. You can hire the best people in the world, but if you don’t trust them with real responsibility, you’re wasting their time and your money. This starts with emphasizing leadership over management. I firmly believe that things need management, and people need leadership. Resist the temptation to be a superhero, spending your days putting out fires and carrying the company on your back. It will only lead to your burnout and high employee turnover.
» MORE: Six Indy pros—Martha Hoover, Ben Diallo, Lisa Moyer, Santiago Jaramillo, Jennifer Payton, and David "Tufty" Clough—dish on how to start a business.
Step 5: Survive The First YearBy Kristin Kohn, founder of Silver in the City/At Home in the City
Mass Ave wasn’t always the destination it is today, but Kohn saw potential when she opened her jewelry boutique there in 2000. She explains how location is just one of the keys to being around 12 months later. When I started Silver in the City in the summer of 2000, I knew who I hoped to see walk through the door. The surrounding neighborhoods were filled with folks hungry for more local shops, and employees from nearby businesses were looking for something to do on their summer lunch breaks. But timing is important, and I was on the edge of being too early for the Mass Ave renaissance.
In my business plan, I outlined three financial scenarios: one for the success I was hoping to have, one for average sales, and one for breaking even. In my first year, I saw all three. When I launched in July, I did about 75 percent of my sales goal—not bad, but not great. Then in December, I was bowled over with a spectacular month. (Note to retailers: If you’re not going to be open for the holidays, don’t bother.) Yet I still had to survive my first winter. In the first few months of 2001, sales plummeted, and I nearly ran out of money. I lessened the staff’s hours and carefully monitored my inventory spending. I quickly learned that the best investment was to pay myself very little (less than $18,000 annually) and reinvest any profits to grow the business. By updating the contents of my jewelry cases and growing the selection of products, I kept people coming back to see what was new and avoided a lingering post-launch slump.
The best advice for surviving the first year is to start small and retain some cash. That gives you the opportunity to fine-tune your business based on initial feedback. I’ve seen too many folks take on large loans to make a big entry, only to close shop after a few months. I did invest immediately in print advertising, but I’m not sure I would recommend that to everyone. Luckily, I had worked in that field previously and could handle a lot of it on my own. These days, anyone can build their social-media presence and create buzz before opening the doors. Once you start to turn a profit, you can look at ways to grow your business through a traditional advertising plan. Eventually, I accepted an offer from a local agency to provide the rebranding that took my business to a new level.
Looking back, it’s easier to see what I gained than what I sacrificed. Yes, the first year was full of 60-hour workweeks, a dramatic drop in income, and very little personal life. But in return, new friends came in the form of customers. My future husband walked through the door one evening and is still here, 13 years later. Most importantly, I found immense satisfaction in watching the neighborhood grow. I now feel so deeply connected to downtown Indy.
Step 6: ExpandBy Ed Rudisell, founder of Siam Square, Black Market, Rook, and Thunderbird
When he opened his first restaurant in Fountain Square in 2008, Rudisell exceeded his sales goals almost immediately. Now a serial restaurateur, he explains how to make a good thing better. I vividly remember standing at a table at Siam Square two years ago, chatting with Micah Frank, the sous chef at R Bistro. We’d known each other for about a year, and he mentioned in passing that he was looking for a partner for a new restaurant concept he had: Black Market. I wanted to partner with the guy. I believed in the idea and felt that our skill sets would complement each other. But I wasn’t sure if I was ready to take on another project. After all, I was still learning the ropes at my first restaurant.
In the end, my desire to be part of something new prevailed. Finding a locationwas the first step. We decided on the east end of Mass Ave because it had a similar feeling to Fountain Square, where Siam Square is. The rent was comparable, and the neighborhood had exactly what I look for: signs of being in the early stages of a commercial growth spurt, supportive neighbors, a niche that hadn’t been filled, and a site that offered something unique. Our building was on a dead end, next to the highway, had no signage, and saw very little traffic. It broke all the rules of “location, location, location.” I like a challenge.
But I was about to learn a few lessons about growth. I had figured that the workload math would be simple addition: One restaurant plus one restaurant equals two restaurants. Wrong. As you expand, the work multiplies for awhile. When I had just one restaurant, I only worked with a small handful of suppliers. That was no longer realistic with two. Some of the new suppliers wanted payment in seven days, some in 14. Some sent invoices, some automatically charged our account. Keeping everything straight turned into a flurry of paperwork.
But having multiple locations did keep my day more interesting. I could bounce back and forth as needed. Since the two places were very different, the variety energized me and kept the long days more bearable. Then something unexpected happened—guilt. When I was working at one restaurant, I felt guilty that I wasn’t at the other.
I’ve since opened Rook in Fletcher Place and Thunderbird in Fountain Square. The same hunger to be part of something new and exciting prevailed each time. But that guilt never goes away. You just have to accept that you can’t be in four places at once. With growth, your role will change out of necessity. You’ll spend more time handling inventory, accounting, invoices—a lot more time in the office than you ever envisioned. But it’s time well spent. Remember, as you expand, you’ll have dozens of employees who depend on you to pay their bills. Don’t take that lightly. Work hard to make sure they have a stable job. In the end, you’re all in it together.
Photos by Tony Valainis
This article appeared in the March 2014 issue.
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