Evaluating Financing

You don't necessarily have to build your business purely organically. There are many options available for people who are willing to define what they want to accomplish and put it into a business plan. However, you have to determine what your prospective Web firm might have to offer, which makes it worthwhile for other people to be interested in it. Is it the talented people who would contribute to projects? Is it your innovative approach to the Web? Is it an ability to make a Web-based product that can be resold?

Venture capital and bank loans can pave the way so that a Web firm can effectively market itself, giving the firm the exposure to build up a nice portfolio and hire talented individuals. However, a bank loan generates risk. Venture capital implies a partial or total loss of ownership interest. Some term venture capital as "vulture capital." Unfortunately, most people cannot enter into a viable Web business, which is going to generate an acceptable level of revenue right away, unless there is some outside funding.

So you don't want to mortgage your house or beg for OPM (other people's money). A nice way to begin is to start building Web sites part time. At Surf's Up, we've used many contractors who are only available at night or on weekends. This gives us the flexibility to use highly talented individuals on a project-by-project basis without having to carry these individuals during slow periods. For the subcontractor, hooking up with another Web firm in this fashion is not a bad idea. It's a great way to ease into the business and put away a little seed money without assuming a great deal of risk. While helping out at a large Web firm in Boston this summer, I was surprised at how many of the team members freelanced. They spent their days working on projects for the firm and then went home to their own lucrative projects. These people have the security of a regular paycheck while having the opportunity to run and bid their own Web projects. It's a very exciting time for skilled Web professionals. There's plenty of work if you know where to look for it.

Exercises

Analyze Current Resources

a)Who do you know who has excellent Web skills? In what areas (graphics, programming, editing, etc.) do these people have their strengths?

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b)What kinds of attachments might you have to the business community? Do you belong to the chamber of commerce or any other networking group? Would you be willing to join?

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c)What are your best skills? Are you a good manager? Are you a strong programmer?

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Determine Need For Outside Investors

a)Research venture capital. Would this be a viable option for your firm?

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b)Research commercial loans through a bank. How could a bank loan benefit your business plan?

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Exercise Answers

This section gives you some suggested answers to the questions in Lab 14.1 with discussion related to those answers. Please post any alternative answers to these questions at the companion Web site for this book, located at http://www.phptr.com/phptrinteractive.

Answers

a)Who do you know who has excellent Web skills? In what areas (graphics, programming, editing, etc.) do these people have their strengths?

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Answer:As more people become interested in Web-based careers, there are more individuals available who are well trained to take on a project team role. I am very lucky in that I am exposed to some wonderfully talented people through the classes that I teach. Some of my former students have become indispensable team members. However, not everyone teaches in a Webmaster certification program and has the chance to evaluate an individual's skills first hand before getting involved on a project with him or her.

There are several crucial points when hiring team members. First rule, be aware of what your best skills are and hire people who complement you.

Rule 2: Hire up. Don't be afraid to hire people who you feel are more skilled than yourself. They can only enhance the product. As long as they don't have an attitude and you can feel pleased to have them on your team, instead of feeling insecure, it's a wonderful opportunity to learn, create, and surpass expectations.

In forming your own project team, think about your neighbors, friends, and co-workers. Who has skills that would complement yours? Who has a good team player attitude? Who has the knowledge to bring a project to a higher level? Who respects your time and wallet? When starting out, don't plan on mentoring. Get good competent people initially. If you want to teach less skilled Web professionals, get paid to do it. Don't do it on your own dollar. After you've made your first million, you can consider taking on people in need of grooming.

b)What kinds of attachments might you have to the business community? Do you belong to the chamber of commerce or any other networking group? Would you be willing to join?

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Answer:How can you generate business organically? The most inexpensive way to generate business is through word of mouth. It's true that sometimes people are more comfortable doing business in new media with someone they know and have confidence in.

One doesn't necessarily want to become like a new life insurance salesperson. Often, these people are advised to make a list of every person they know, including family members, and call them, asking if they need life insurance. However, it might be good to analyze whether you know anyone who has a business that could benefit from a Web presence.

c)What are your best skills? Are you a good manager? Are you a strong programmer?

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Answer:My strong points are that I am a good hardcore programmer, I understand project flow, and I interact well with clients. A highly valued member of my project team is an excellent conceptualist. Having had a background in advertising and marketing, Charlie can key in on the message the client is trying to send and come up with innovative ways to get it across via Web-based media. We always tease each other that when we're listening to a client, I'm thinking, "How does it work?" and Charlie's thinking, "What should it say?" This way, we balance each other well. We also have another team member who is a terrifically talented graphic artist. He can work from Charlie's concepts to create a beautiful user interface. Powell's sense of style comes from a natural feel for artwork. His talent isn't learned but rather a natural one. Without my team members, I am just a good coder, project manager, and client account manager. When selecting team members, I keep this in mind and hire people who can take up the slack.

Answers

a)Research venture capital. Would this be a viable option for your firm?

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Answer:When I first heard someone refer to venture capital (VC), I initially thought he was talking about the Vietnam War. Now, people drop this term around Web firms as freely as they talk about HTML. VC, a.k.a. "vulture capital" or venture capital, used wisely can jump-start a business, benefiting both investors and the company founders.

There's a lot of money to be had for Internet start-ups. Unfortunately, there are a lot of inexperienced people unwittingly mortgaging their future with an ill-conceived business plan. If the company is already generating revenues, this is valid consideration. However, accepting venture capital before the first dime has been turned is risky at best. Think carefully before giving away a piece of your business. If you want to go into business for yourself to allow for greater flexibility to exercise your vision, you may be just trading one boss for another should your business plan fail.

Another option is angel capital. Usually, the ownership of the business is not diluted to the same extent as venture capital, mostly because there is less money involved. However, $30,000 to $50,000 can go a long way to initiate a good marketing effort while avoiding some hefty bank interest rates or an intensive loan application procedure.

b)Research commercial loans through a bank. How could a bank loan benefit your business plan?

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Answer:If you have good personal credit, you might consider going to a bank for $30,000 to $50,000 to initially market your Web firm. Radio and print advertising can be expensive. Also, some clients have a greater comfort level if they can come into an office atmosphere as opposed to someone's home office. My firm has been operated as a home office for three years, and we've saved a great deal of money this way. However, we have run into problems time to time with clients who dropped by the house and felt since we were carrying such low overhead, our time wasn't worth as much. Most of these folks are not educated as to how much a Web developer's time costs. They jump to conclusions. Sometimes clients feel that a business run out of a home office is not serious. There are also some inherent risks involved in opening one's home to the public, be it clients or employees. A bank loan can generate a little seed money to get a business into office space, market the firm to get money flowing through the door, and hire competent professionals.

Self-Review Questions

In order to test your progress, you should be able to answer the following questions:

1)(True/False) Angel capital can be more preferable to a bank loan in that

  1. _____ Ownership interest in the Web firm is not diluted.
  2. _____ If you have poor or nonexistent personal credit, it is a viable cash resource.
2)(True/False) If I were a strong graphic designer, I would want to hire

  1. _____ A good multimedia professional
  2. _____ An ASP and/or VB Script programmer
  3. _____ An administrative assistant


Exploring Web Marketing and Project Management
Exploring Web Marketing and Project Management
ISBN: 0130163961
EAN: 2147483647
Year: 2000
Pages: 87

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