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4.1.7 Dave McClure - Startup Metrics for Pirates: AARRR! - Ignite Seattle 2007-8-8

After implementing a marketing program, entrepreneurs must evaluate its performance. Every program should have performance standards to compare with actual results. Researching industry norms and past performance will help to develop appropriate standards.
Entrepreneurs should audit their company”s performance at least quarterly. The key questions are:
1. Is the company doing all it can to be customer-oriented?
2. Do employees ensure the customers are satisfied and leave wanting to come back?
3. Is it easy for the customer to find what he or she wants at a competitive price?

Do you need more capital or can you manage existing cash flow more effectively?
How do you define your need? Do you need money to expand or as a cushion against risk?
How urgent is your need? You can obtain the best terms when you anticipate your needs rather than looking for money under pressure
Before inquiring about financing, ask yourself the following:
Do you need more capital or can you manage existing cash flow more effectively?
How do you define your need? Do you need money to expand or as a cushion against risk?
How urgent is your need? You can obtain the best terms when you anticipate your needs rather than looking for money under pressure.
How great are your risks? All businesses carry risks, and the degree of risk will affect cost and available financing alternatives.
In what state of development is the business? Needs are most critical during transitional stages.
For what purposes will the capital be used? Any lender will require that capital be requested for very specific needs.
What is the state of your industry? Depressed, stable, or growth conditions require different approaches to money needs and sources. Businesses that prosper while others are in decline will often receive better funding terms.
Is your business seasonal or cyclical? Seasonal needs for financing generally are short term. Loans advanced for cyclical industries such as construction are designed to support a business through depressed periods.
How strong is your management team? Management is the most important element assessed by money sources.
Perhaps most importantly, how does your need for financing mesh with your business plan? If you don”t have a business plan, make writing one your first priority. All capital sources will want to see your for the start-up and growth of your business.
There are two types of financing: equity and debt financing. When looking for money, you must consider your company”s debt-to-equity ratio - the relation between dollars you”ve borrowed and dollars you”ve invested in your business. The more money owners have invested in their business, the easier it is to attract financing.
If your firm has a high ratio of equity to debt, you should probably seek debt financing. However, if your company has a high proportion of debt to equity, experts advise that you should increase your ownership capital (equity investment) for additional funds. That way you won”t be over-leveraged to the point of jeopardizing your company”s survival.
Equity Financing
Most small or growth-stage businesses use limited equity financing. As with debt financing, additional equity often comes from non-professional investors such as friends, relatives, employees, customers, or industry colleagues. However, the most common source of professional equity funding comes from venture capitalists. These are institutional risk takers and may be groups of wealthy individuals, government-assisted sources, or major financial institutions. Most specialize in one or a few closely related industries. The high-tech industry of California”s Silicon Valley is a well-known example of capitalist investing.
Venture capitalists are often seen as deep-pocketed financial gurus looking for start-ups in which to invest their money, but they most often prefer three-to-five-year old companies with the potential to become major regional or national concerns and return higher-than-average profits to their shareholders. Venture capitalists may scrutinize thousands of potential investments annually, but only invest in a handful. The possibility of a public stock offering is critical to venture capitalists. Quality management, a competitive or innovative advantage, and industry growth are also major concerns.
Different venture capitalists have different approaches to management of the business in which they invest. They generally prefer to influence a business passively, but will react when a business does not perform as expected and may insist on changes in management or strategy. Relinquishing some of the decision-making and some of the potential for profits are the main disadvantages of equity financing.

Business Plan BasicsA business plan precisely defines your business, identifies your goals, and serves as your firm”s resume. The basic components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.
Plan Your Work
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives. ‘The business plan is a necessity. If the person who wants to start a small business can”t put a business plan together, he or she is in trouble,’ says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles. Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don”t have enough time. But just as a builder won”t begin construction without a blueprint, eager business owners shouldn”t rush into new ventures without a business plan. Before you begin writing your business plan, consider four core questions: What service or product does your business provide and what needs does it fill? Who are the potential customers for your product or service and why will they purchase it from you? How will you reach your potential customers? Where will you get the financial resources to start your business?

Important tips for start-ups concerning venture capital, business plans, partners and potential legal issues. Presented by attorney Roman R. Fichman.

Business Plan BasicsA business plan precisely defines your business, identifies your goals, and serves as your firm”s resume. The basic components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.
Plan Your Work
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives. ‘The business plan is a necessity. If the person who wants to start a small business can”t put a business plan together, he or she is in trouble,’ says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles. Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don”t have enough time. But just as a builder won”t begin construction without a blueprint, eager business owners shouldn”t rush into new ventures without a business plan. Before you begin writing your business plan, consider four core questions: What service or product does your business provide and what needs does it fill? Who are the potential customers for your product or service and why will they purchase it from you? How will you reach your potential customers? Where will you get the financial resources to start your business?

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Bizak is a business valuation application which
calculates & benchmarks the profitability of internet startups. Entrepreneurs use these calculations to increase profits & lower costs. Investors analyze the statistics to connect with new funding opportunities and
professionals network with startups to form business partnerships.
Entrepreneurs use Bizak to calculate the profitability of their business according to website analytics and key performance indicators. These calculations can then be compared to other startups and industry benchmarks. With these calculations entrepreneurs are then invited to join Bizak’s elite network of investors and business professionals who are eager to invest in your profitability.
Professionals use Bizak’s comparative traffic analysis to discover new advertising and business opportunities.
Investors use Bizak to discover new investment opportunities. From the calculation of comparative benchmarks investors can evaluate the earnings potential of startups in comparison to their competitors and industry.

Do you need more capital or can you manage existing cash flow more effectively?
How do you define your need? Do you need money to expand or as a cushion against risk?
How urgent is your need? You can obtain the best terms when you anticipate your needs rather than looking for money under pressure
Before inquiring about financing, ask yourself the following:
Do you need more capital or can you manage existing cash flow more effectively?
How do you define your need? Do you need money to expand or as a cushion against risk?
How urgent is your need? You can obtain the best terms when you anticipate your needs rather than looking for money under pressure.
How great are your risks? All businesses carry risks, and the degree of risk will affect cost and available financing alternatives.
In what state of development is the business? Needs are most critical during transitional stages.
For what purposes will the capital be used? Any lender will require that capital be requested for very specific needs.
What is the state of your industry? Depressed, stable, or growth conditions require different approaches to money needs and sources. Businesses that prosper while others are in decline will often receive better funding terms.
Is your business seasonal or cyclical? Seasonal needs for financing generally are short term. Loans advanced for cyclical industries such as construction are designed to support a business through depressed periods.
How strong is your management team? Management is the most important element assessed by money sources.
Perhaps most importantly, how does your need for financing mesh with your business plan? If you don”t have a business plan, make writing one your first priority. All capital sources will want to see your for the start-up and growth of your business.
There are two types of financing: equity and debt financing. When looking for money, you must consider your company”s debt-to-equity ratio - the relation between dollars you”ve borrowed and dollars you”ve invested in your business. The more money owners have invested in their business, the easier it is to attract financing.
If your firm has a high ratio of equity to debt, you should probably seek debt financing. However, if your company has a high proportion of debt to equity, experts advise that you should increase your ownership capital (equity investment) for additional funds. That way you won”t be over-leveraged to the point of jeopardizing your company”s survival.
Equity Financing
Most small or growth-stage businesses use limited equity financing. As with debt financing, additional equity often comes from non-professional investors such as friends, relatives, employees, customers, or industry colleagues. However, the most common source of professional equity funding comes from venture capitalists. These are institutional risk takers and may be groups of wealthy individuals, government-assisted sources, or major financial institutions. Most specialize in one or a few closely related industries. The high-tech industry of California”s Silicon Valley is a well-known example of capitalist investing.
Venture capitalists are often seen as deep-pocketed financial gurus looking for start-ups in which to invest their money, but they most often prefer three-to-five-year old companies with the potential to become major regional or national concerns and return higher-than-average profits to their shareholders. Venture capitalists may scrutinize thousands of potential investments annually, but only invest in a handful. The possibility of a public stock offering is critical to venture capitalists. Quality management, a competitive or innovative advantage, and industry growth are also major concerns.
Different venture capitalists have different approaches to management of the business in which they invest. They generally prefer to influence a business passively, but will react when a business does not perform as expected and may insist on changes in management or strategy. Relinquishing some of the decision-making and some of the potential for profits are the main disadvantages of equity financing.

Author Jessica Livingston discusses her book “Founders At Work: Stories of Startups’ Early Days” as part of the Authors@Google series. This event took place on April 19, 2007, at Google’s Mountain View, CA, headquarters.