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The Complete New-Business Survival Guide

Inc.'s catalog of the best books, agencies, networking groups and information sources for the self-educating CEO.
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New-Business

Survival Guide

Where can you learn about locating capital, finding the best advisers, controlling cash flow, or doing on-the-cheap market research? Here's help: Inc's catalog of the best books, agencies, networking groups, and unique information sources for the self-educating CEO

Times have changed. Planning is in. The much-mythologized, hip-shooting gunslinger-entrepreneur is dead. Homework -- among start-up founders -- is back.

But apparently, not the right kind of homework.

In an oft-cited National Federation of Independent Business study of 2,994 new companies, 43% of founders reported they had seriously considered their start-up for a long time before things finally came together -- they'd studied, reflected, and planned. And yet, the 1990 study discovered, the "planners" as a group proved no more likely to survive the first three years than the business owners who weren't given either to planning or to cautious decision making (namely, the "a-good-opportunity-came-along-and-I-jumped" crowd).

So why don't the conscientious students get an edge? Because too often and all too understandably, they begin their homework without knowing what it is they don't know. The process of creating and managing a company is to the neophyte founder so bewildering and so opaque that instinct can't possibly reveal where his or her knowledge has gaps. Instinct propels founders toward the obvious: where to locate, how to find money, what's a good format for the business plan. Indeed, most would-be CEOs still spend too much time perfecting each mousetrap before considering whether anybody might really want to buy it.

Identifying what you don't know, then, is the first crucial step in starting a company. Here's more evidence: In "The Truth About Start-ups" ([Article link], April 1991), Inc. revisited the 27 companies profiled in the Anatomy of a Start-up series from 1988 through 1990. The CEOs we tracked over time found they had underestimated a lot of things, including the time and effort needed to test an idea; the industry experience required; the intelligence of the competition; the sales cycle (the time it would take for the customer to actually purchase); the time involved in being the boss; and the emotional cost of going it alone. They discovered knowledge gaps and skill gaps they'd never anticipated. And, because they had to fill those gaps to survive, they discovered the pressing need to learn how to learn.

The rigorously selected resources in this catalog -- the people, organizations, books, pamphlets, and tapes -- will, we hope, help.

The books we recommend reading first (see "The Big Picture," page 2) will give you a view of the start-up process as an organic whole, plus glimpses of company-operations specifics. From Peter Drucker, Paul Hawken, and friends you'll gain an awareness of what you don't know about running a company. Also, you'll find thoughtful approaches to another, less tactical set of questions -- ones that speak to your deep-seated dreams, personal goals, ethics, and ideals. What are my measures of success? What kind of company do I want? How big and how fast should I grow it? Can I have a life, too? Should I have a partner?

None of those questions is easy to answer. And as soon as you've answered them, you'll be confronted with more. So turn to our catalog for a guide to the best sources of help. Bounce your concerns off outside advisers; read about bootstrap market research; get ideas for starting, and paying, your work force. We've made the best Inc. reprints available, too -- assembled for each category of need.

"Once you have learned to plan," writes Hawken in Growing a Business, "you have to plan to learn." Let the homework -- the inspiring, problem-solving, dream-saving, right kind of homework -- begin.


THE BIG PICTURE

What these six books below amount to is the best short syllabus available on new-business creation -- the ideal start-up overview.

The primary texts are Timmons and Hawken. Try reading them together, or reread Hawken while you're working your way through New Venture Creation. The two authors touch on many of the same topics and sentiments, with very different styles. Hawken, for example, eloquently advocates the need for finding the start-up process and pacing that are right for you. Timmons does the same thing (Chapter 17, specifically) in workbook fashion, by using case studies that offer specific examples of how to learn as you go along. Their company examples tend to be complementary, too (Hawken heavy on California and consumer businesses, Timmons citing more manufacturers). Timmons's book weighs in at 700 pages; you can skip some of his exercises and still get a lot out of it, as it's so rich with resources. At 250 pages, Growing a Business appears lighter, but first-time entrepreneurs will find themselves reading some paragraphs two and three times before turning the page.

Like Hawken, Drucker has a concise way of wording things in The Practice of Management; of his many books, this is the one to begin with. It's a must-read before you write a business plan, says one CEO, as well as a "timeless" reference book. It was published decades before anything else on this list, yet chapters such as "What Is Our Business -- and What Should It Be?" deliver a very modern message about the importance of staying close to the customer. Fundamental start-up questions are handled in chapters such as ~"What Is a Business?" and "The Small, the Large, the Growing Business." CEOs who are further along in the company-building process may get more out of this book than Growing a Business.

If you prefer the narrative style of Hawken, you'll probably also enjoy Honest Business, something of a precursor to Hawken's book. This 200-page text also has great company stories to share. The "Small Capital" and "A Complete Idea" sections are particularly fine. Get Honest Business at the library; Growing a Business should be bought and kept at your bedside. Like Honest Business, Joline Godfrey's book (which will be at least as provocative for men as for women) illustrates that there's more than one way to run a company, and there are many ways to measure success. More than the other books here, Our Wildest Dreams addresses the connection between living and working -- and convinces us that founders who ignore it do so at their peril.

For another, somewhat more scholarly take on the question, What kind of company do I want to build? see Beyond Entrepreneurship, by two Stanford business professors. They revisit firmly established companies such as Nike, L.L. Bean, Wal-Mart, Federal Express, and Sony, and attempt to discover which seeds, planted at the start, ensured long-term health and success.

Read all six books; think of them as touchstones. They'll help you know what you don't know. And help you know more than when you began.


New Venture Creation,
by Jeffry Timmons (Richard D. Irwin, 1985, $46.95).

Growing a Business, by Paul Hawken (Fireside, 1987, $9.95).

The Practice of Management, by Peter Drucker (Harper & Row, 1954, $10.95).

Honest Business, by Michael Phillips and Salli Rasberry (Clear Glass Publishing, 1981, $9).

Our Wildest Dreams: Women Entrepreneurs Making Money, Having Fun, Doing Good, by Joline Godfrey (HarperCollins, 1992, $20).

Beyond Entrepreneurship: Turning Your Business into an Enduring Great Company, by James Collins and William Lazier (Prentice Hall, 1992, $19.95).

Inc. Reprints
The Big Picture

"The Truth About Start-ups" ([Article link], April 1991): Why new businesses succeed or fail.

"Second Thoughts on Growth" ([Article link], March 1991): Are cautious companies more durable?

"The Turnaround" (August 1986): In-depth story of innovative management.


OUTSIDE ADVISERS

The Start-up Resource Catalog

Perspective, ideas, and feedback, provided in the flesh and addressed specifically to your own business and its unique concerns -- that's what outsiders can offer. few company builders seek enough of such advice. Here are the best places to look for it .

Friends and colleagues. They're more useful than you probably imagine. If they pick up flaws in your thinking, think some more and try to answer their objections.

Suppliers/vendors. Companies connected with your industry are often willing to lend an ear and dispense advice (whether you end up doing business with them or not). Dan Elasky, founder of Quintilian Design, in Fredericksburg, Va., is trying to bring several games to market. He's learned a lot by talking to retailers, printers, and suppliers of game parts. "Even if these aren't the people I'll deal with, they've given me lots of 'nuts and bolts' about games."

Small-business-development centers, on college campuses in most states, regularly offer seminars on market research and business plans. They're about the best resource the Small Business Administration has to offer, but some SBDCs are better than others. To get the names of several, call the SBDC Connection (800-633-6450), which operates as a clearinghouse for all the centers. Private, nonprofit, government-funded industrial-development corporations operate like SBDCs but, their directors claim, without the government red tape. With names like the Greater Burlington Industrial Corp., they're hard to find in the phone book; ask your local or state chamber of commerce, which may operate a small-business division, as Nashville and Cleveland do -- and the trend is growing.

Outside professionals. Identify companies you admire and find out what firms they use for advertising, legal, or accounting services. "By seeking the same or similar counsel, you'll find people who know how things get done in that industry," says Judy Drinka, a lawyer at Case, Drinka & Diel, in Milwaukee, who advises start-ups.

Trade groups. Unfortunately, these are often short on start-up companies and long on big corporations. But don't overlook them. Besides being a decent source of industry statistics (see "Bootstrap Market Research," page 5), trade groups can be fertile ground for finding a mentor (someone older and wiser who knows your industry inside and out but doesn't compete head on).

Professional/venture groups. One of the best sources of outside advice, because (ideally) members are in the same boat. Groups range from informal networking clubs in the neighborhood to local branches of national organizations like the National Federation of Independent Business (202-554-9000), based in Washington, D.C. The most helpful organization, suggests one CEO, is usually one whose members are just one step ahead of you in company-building experience. Annual dues for some groups can add up. Consider only groups that allow you to "sample" a meeting for free.

Once you've got your company up and running, check out Creating Effective Boards for Private Enterprise, by John Ward (Jossey-Bass, 1991, $25.95). Ward devotes a whole chapter to the truths and myths about boards, and offers concrete suggestions about when to create a board (sooner than you might think), how to select members, and how to get the most out of a board.

Inc. Reprints

Outside Advice

"Words from the Wise" ([Article link], June 1991): How can mentors help you? National Leisure's founders turned theirs into a competitive advantage.

"With a Little Help from His Friends" ([Article link], April 1989): A long-shot start-up doesn't have to go it alone.

"Unlimited Partners" ([Article link], April 1990): How three CEOs make good use of their outside boards.


NETWORKING 101

Today there's no shortage of organizations, consul-tants, accountants, and lawyers ready to help aspiring entrepreneurs. So whom should you turn to for help? Begin by contacting your city or state department of development; your state university system (ask for "business outreach"); and your local Small Business Administration office.

Ask where you can get one-on-one advice about starting your business and gauging its viability. Or ask, "Where are the top networking organizations in the state?" You'll find out about local professional entrepreneur groups and business coalitions that provide free or reduced-rate training and consultation.

Chances are, you'll also be given the name of your local incubator (a business park where start-ups can rent cheap space), another potentially good source of information on subsidized and independent services for small businesses. The SBA can direct you to the nearest small-business-development center (SBDC), where, with a little luck, you can find community professionals who do pro bono work. (See "The Truth About the SBA," page 7.)

Once you've explored basic business issues with your one-on-one contacts, ask them where you can turn for more specific advice about marketing, product research, finding sales reps, and so on.

One caveat: the more you know about the sort of company you want to start (for example, do you want to build a large organization or stay solo?), the better you'll be able to judge which groups and services fit you best -- and whose advice you should heed.


CASH AND OPERATIONAL CONTROLS

With your first sale still a distant dream, the concept of money-in, money-out may seem theoretical indeed. but once you're up and running, cash-flow problems can sink you quickly. Think about financial and operational controls beforehand. don't expect to master the subject overnight.
* Newcomers to cash flow should start with "Understanding Cash Flow," a 10-page pamphlet you can pick up from your local SBA office for about $1.

* "Internal Controls for Protection and Profit," an 8-page article from the Small Business Forum (fall 1990), establishes up front the importance of controls for small-business owners. Focuses mainly on employee theft, using case-study examples. A list of resources at the end covers different aspects of controls. Small Business Forum reprints are 50¢ each; call 608-263-7843.

* Coopers & Lybrand Guide to Growing Your Business. The chapter on accounting systems and controls, explained in everyday English, alone might justify the $23 price tag. Available from offices of C&L, which has devoted considerable resources to small business, including teams of accountants who, on a retainer basis, advise start-ups on controls, taxes, and business plans. Call 212-259-2244.

* Cash Flow Problem Solver, by Bryan Milling (Sourcebooks, 1992, $19.95). If you're easily intimidated by numbers, and terms like average days outstanding make you dizzy, this is the book for you. Call 708-961-2161.

* Small Business Survival Guide, by Robert Fleury (Sourcebooks, 1991, $17.95). Good for its heavy emphasis on cash management.

Inc. Reprints
Controls

"The Language of Business" ([Article link], February 1990): How one CEO figured out which numbers

really matter.

"Mrs. Fields' Secret Ingredient" (October 1987): The recipe for the growth of Mrs. Fields Cookies.

"A Confidence Game" ([Article link], December 1989): Taking the mystery out of cash flow.


MARKETING & SELLING ON THE CHEAP

"True marketing starts out with the customer, his demographics, his realities, his needs, his values," writes Peter Drucker in management. "It does not ask, 'what do we want to sell?' It asks, 'What does the customer want to buy?' . . . The aim of marketing is to make selling superfluous." Listed in this section are some books and tapes that will help you make the transition from selling to marketing-without spending a small fortune on advertising.
* Guerrilla Marketing Attack,
by Jay Conrad Levinson (Houghton Mifflin, 1989, $8.95). If you're unfamiliar with the half dozen or so of Levinson's "guerrilla" books, here's the place to start. Attack effectively lays out the many options for small companies that can't afford to hire an advertising or PR agency and, more important, that want to conduct their own marketing. Will also help you get the most from any professionals you do hire. "The book helped me structure my marketing plan, so when I did go to a marketing company later, I knew what I wanted, and I knew what to ask," says Ed LaFlamme, president of a landscaping company in Bridgeport, Conn. Guerrilla Marketing Weapons (Plume, 1990, $9.95) expands on the 100 marketing methods noted in Attack.

* Do-It-Yourself Publicity, by David Ramacitti (AMACOM, 1990, $17.95). Publicity is free, but you still need a game plan for getting it. If you have time for just one book on the topic, this is the one, say the pros. No theory, just down-to-earth information from a former newspaper man. Sample media file, publicity plan, and press releases are included.

* Selling the Dream: How to Promote Your Product, Company, or Ideas -- and Make a Difference -- Using Everyday Evangelist, by Guy Kawasaki (HarperCollins, 1991, $20). Long title, but a fun and inspiri , by Guy Kawasang read on how to get the word out. Kawasaki comes armed with a playful sense of humor and some great for-profit and nonprofit examples to illustrate his brand of "evangelism." Don't let that word scare you off -- this is not a preachy text. It's very practical, with a lot of how-to tips for enlisting others in your cause. The book ends, appropriately, with the Apple Macintosh product-introduction plan, cowritten by Kawasaki. Warning: once you read this book, traditional forms of selling and marketing won't seem too appealing.

* Positioning: The Battle for Your Mind, by Al Ries and Jack Trout (Warner Books, 1986, $4.95). How to think about marketing, summed up in 200 pages. A good place to start, says Gordon Gossage, vice-president of sales and marketing for MathSoft, in Cam-bridge, Mass. "After all, if you can't position your product, you can't do direct mail, advertising, or anything else."

* Once you've given some thought to positioning, you'll want to read up on pricing. Start with "Improving Decision Making with Simple Break-even Analysis" (spring 1990), a simple, easy-to-read article that serves as an introduction to the often-burdensome task of pricing and cost analysis (Small Business Forum, 50¢, 608-263-7843).

* The Psychology of Selling. Series of eight tapes from Brian Tracy (Nightingale-Conant, 1987, $69.95) that covers everything from prospecting to closing the sale and includes an extra tape on effective time management. For the would-be salesperson; techniques apply just as well to products or services. "It's good for motivation and for anyone who's just starting," says Michael Lindsey of Lindsey Limousine, in Manchester, Conn. To order, call 800-323-5552 or 708-647-0300.

Inc. Reprints
Marketing

"Do-It-Yourself Marketing" ([Article link], November 1991): How smart companies are selling more and spending less.

"Portrait of the CEO as Salesman" (March 1988): A first-person account by a transformed founder.

"Everything You Always Wanted to Know About PR . . ." ([Article link], October 1988): Good PR is simpler and more powerful than you think.

(continued)


STARTING, AND PAYING, YOUR WORK FORCE

Many founders have never hired an employee before -- that's scary, given that your work force is the best leverage you've got. whether you're hiring your first employee or your 50th, it's a decision worth studying up for .
* Finding others who've dealt with the personnel-related problems you confront may help. The Society for Human Resource Management, in Alexandria, Va., sponsors MemberNet, a networking service that connects you with 3,500 society members who serve as volunteer consultants on various human-resources issues. "Rather than having to reinvent the wheel, you can pick up the phone and call someone and ask questions," says Adina Marcheschi, formerly of CPS Employment Services Network, in Westchester, Ill. A single membership costs about $160 a year. Call 703-548-3440.

* "Employees: How to Find and Pay Them," an 18-page publication from the SBA, will provide you with answers to some basic questions about interviewing candidates, using temp services, and establishing fair pay. A new edition is due out this summer. Call 202-205-6740. It costs $1.

* If there's one book you read on the topic, make it Hiring the Best , by Martin John Yate (Bob Adams, 1988, $9.95). "There are a ton of books out there on the subject of hiring, but three-quarters of them are baloney," says Larry Murphy, in-house staffing consultant/ hiring specialist at fast-growing Cabletron Systems, in Rochester, N.H. He says the book addresses the needs, values, and desires of "the new work force," roughly defined as 25-to 35-year-olds who work in companies built around new technologies. But you don't have to be in high tech to appreciate the book. Murphy says it has helped him think in general about the sort of individual best suited to each job.

* Can't afford to hire the talent you need? Ask about the student-consul-tants-for-hire programs at nearby business schools. For example, M.B.A. candidates with Weatherhead Student Consultants, at Case Western's Weatherhead School of Management, in Cleveland, do project work for about $25 an hour for small companies and start-ups. And Stanford Business School's "New Ventures" course requires students to work on a project for a small or midsize company. Check other business schools; they're likely to have similar programs. (For information on professors for hire, see "Bootstrap Market Research," below.)

Inc. Reprints
Work Force

"Managing the New Work Force" ([Article link], January 1990): Ben Strohecker knows what it takes to keep his employees happy, and it's not cash.

"May the Force Be with You" (July 1987): Au Bon Pain turns clock punchers into gung-ho professionals.

"Inside Out" ([Article link], August 1989): When it makes sense to use outside contractors.


BOOTSTRAP MARKET RESEARCH

The worlds biggest consulting firm charges nothing and probably has a branch in your town. It's called the library. (See "Library Science," page 6.) Universities, trade associations, and even competitors also can help you.
* After you emerge bleary-eyed from the library, reams of statistics under your arm, you may want to actually pay for two books. The Insider's Guide to Demographic Know-How, by Diane Crispell (Probus, 1990, $49.95), can help you understand what all those numbers say about your customers. Do-It-Yourself Market Research , by George E. Breen and Albert B. Blankenship (McGraw-Hill, 1989, $16.95), will help you collect your own numbers to augment big-picture data. It introduces readers to the fundamentals of market research, gives step-by-step instructions for conducting a research study, and includes many sample questionnaires.

* Some libraries now offer rent-a-researcher programs, a reasonably priced option for those who've gotten as far as they can on their own. Information professionals at the Cleveland Public Library's fee-based service agency, the Cleveland Research Center (216-623-2999), consult not just public-library resources but government offices, university libraries, and 2,000 on-line databases. The center charges $60 an hour, with a 15-minute minimum, plus various pass-through costs.

* Trade associations. Trade associations may prove your best source, or they may prove useless; the only way to judge is to contact them. Even a mediocre association should point you toward some industry statistics, publications, and trade shows. Find trade associations listed in the Gale Encyclopedia of Associations in the library, indexed by name and subject, or in the Small Business Sourcebook.

* A trade group may also help identify your competitors. And while they may one day be your enemy, consider them your well-informed friends for now -- and hope they reciprocate. Chip Perfect has started three businesses in Lawrenceburg, Ind.: a ski resort, a warehousing facility, and a business incubator. In each case he's found others in the industry more than willing to share thoughts about equipment and operating ratios. Those outside his market opened up more quickly, but when Perfect started his warehousing business, he spoke to the biggest local player in the industry. The competitor didn't mind a small company catching the little fish it threw back. "Its attitude was, we'll help you out as long as you recognize your place."

* Perfect also got help from university professors. "They've spent a lifetime studying your subject and are certainly eager to tell someone about it." When Perfect was planning his warehousing business, one professor listed five books on the subject and told him which one to read if he read only one (which he did). The professor also gave Perfect the names of industry contacts outside the area and a consultant who, in a free interview, provided Perfect with basic industry information. (Professors in entrepreneurial studies can help with a range of issues; for a list of them, call George Solomon at the SBA, 202-205-6665.)

* In addition, small-business institutes at colleges around the country can provide students who'll do some of your market-research legwork. Call the SBA for the name of an SBI near you.

* How to Evaluate the Potential for Success of a New Product or Technology: A 36 Point System for Spotting Money Makers and Avoiding Money Losers, by James F. Riordan (James F. Riordan, 1989, $49.95). A bit pricey, but not for what you're getting. Straightforward and rigorous process that's used as a "test" by one seed-capital firm we know.

Inc. Reprints Market Research

"But Will It Fly?" (January 1987): A terrific new product is just the beginning.

"The New American Start-up" ([Article link], September 1988): A new, and systematic, model of entrepreneurship.

"Customer Service: The Last Word" ([Article link], April 1991): Intuit has learned ways to find out what customers need.


LIBRARY SCIENCE

So how does one explore libraries' wealthy mines? "Your single best first step is to find a good research librarian and buy him or her lunch. It's librarians' job to help find answers, and they love to do it," says David Thornburg, director of the Small Business Development Center at the Wharton School of Business, in Philadelphia. Adds Debra Malewicki, director of the University of Wisconsin's Innovation Center: "If you can define your problem even nebulously, the librarian can target your search. Most entrepreneurs haven't been in the library for a while. The technology has changed. There's information stored on CD-ROM now, and you can do database searches."

Most people we spoke to recommended visiting a large public or university library. Staffers there can introduce you to RMA's Annual Statement Studies , which gives income statements and financial ratios for four sizes of businesses in every major industry; The Almanac of Business and Financial Ratios, also annual, which lists total receipts and 22 ratios for industries; U.S. Census data, from both the popular census and the census of the retail trade, conducted every five years; State and County Business Patterns , which list local businesses' sales, annual payroll, number of employees, and more; Thomas Register , which lists American manufacturers and their trademark names; the Standard Rate and Data Ser-vice's guide to direct-mail lists; Grey House Publishing's directory of catalog marketers; and on-line databases that show you what the media has said about your market and competitors. Also, the U.S. Patent and Trademark Office has designated libraries around the country to conduct patent searches.

If you're bothering the librarian too often, check the shelves for the Small Business Sourcebook , edited by Carol A. Schwartz (Gale Research, Detroit), a perfect guide through the tangle of resources. Profiles of 224 types of businesses target resources for everything from accounting services to yogurt shops. That last listing, for instance, points you to four sources of start-up information; four key associations; eight other associations, including the American Cultured Dairy Products Institute; such reference works as The Very Best: Ice Cream and Where to Find It; and information on suppliers.

CAPITAL

With small-business loans and venture capital hard to come by, we won't bore you with a list of how-to-get-money-quick books. Instead, we present reading material that will help you put the various capital options into perspecti

Last updated: Jul 1, 1992




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