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How to Create a Successful Brand

Creating your company’s brand is one of the most important things that you’ll do as a business owner. Whether you’re starting a new company, or expanding an existing small business, having a strong brand that represents what you do, conveys a professional and stable image, and builds a relationship with your target audience is essential to the success of your company.

When most people think of branding, they think of customers, but they fail to see the impact that a strong brand has on all of the other functions of their business. Having a great brand that conveys that your business is stable and professional can contribute positively to your company on so many levels.

Consider this: You’re a banker or investor, and you get approached by two companies. The first sends you a pitch on plain paper, stuffed in a plain envelope and includes a business card that they printed on their home printer. The second sends you a pitch on company letterhead, has a unique logo, includes a business card that is well-designed and professionally printed, provides some professionally printed brochures and backgrounders on the company, and puts it all into a professionally designed and printed folder and envelope. Which company would you feel is more professional, stable, likely to engage successfully with consumers, and ultimately more likely to generate revenue?

It doesn’t just stop with investors and banks, either. Potential employees are more likely to want to work for a company that connects with them through a strong brand. Even vendors, who are selling you something, are more likely to be willing to negotiate extended terms or special agreements with a company that appears professional, established, and stable.

Here are some tips for creating a killer brand for your small business or startup:

1) Find the right name for your company. A short name that conveys what you do is always the best. Try to find a name that allows you to secure its .com domain name. Also, always make sure to do a little bit of research to ensure that the name you want to use isn’t already trademarked or in use by another person or company. Megan from PartnerUp wrote an excellent article on our blog about how to name a company.

2) Have a logo professionally designed. Your logo is the centerpiece of your brand and will appear on everything from business cards and stationery, to apparel, to your building and signage, so it’s not worth skimping here. An exciting trend in logo design is online logo design companies. In the past, it would cost thousands or tens of thousands of dollars to have an ad agency design a logo for you. Today, through the internet you can find several companies who offer logo design for less than $800. Before choosing a logo design company, look through their portfolio and make sure that you like their work, then contact a few previous customers to make sure that they were satisfied with the results.

3) Create brand guidelines. Most people have never heard of brand guidelines, but they are so important to a strong brand. For a sma ll business, brand guidelines can be as simple as a 2-3 page document that describes what colors your logo should appear in, what fonts your company uses on documents, signs, and brochures, what size your logo should be with respect to its page, what tagline should appear with your logo and where, what format brochures should use, what signage should look like, how employees’ e-mail signatures should appear, and other basic brand guidelines. The goal here is to create consistency across all of the different types of media your brand will be seen on.

4) Have stationery and brochures professionally designed. Many business owners are tempted to create their own stationery and brochures to save a few dollars. Most of the companies that do online logo design also do stationery and brochure design. This investment is well worth it and will really help to convey a unified and professional image for your business. I recommend creating your brand guidelines first because you can then send these guidelines to the designer working on your stationery and brochures so that they’ll conform to your newly-created brand standards.

5) Get everything professionally printed. On a per-page basis, it is usually no more expensive for you to hire a professional printer than it is to print things yourself. However, the results are much different — collateral printed by a professional printer looks, well, professional! This is very important to building a strong brand.

6) Get a web site and domain name. Have a web site professionally designed and hosted on your own domain name. Business has shifted from being done using phone books to being done online. Accordingly, your web site will in many cases be your first contact with potential customers. Invest in your web site accordingly.

7) Buy a phone system and get a phone line for your business. It used to be expensive to buy a phone system, often costing tens of thousands of dollars. Now, you can buy simple pre-configured phone systems with an auto-attendant for less than $1,000. Use the auto-attendant and have someone that you know (not yourself), with a professional-sounding voice, record the greeting and prompts for your phone system. This is another easy way to maintain a level of professionalism that your customers and investors will expect to see in a stable business.

Invest in public relations. One of the most important things that you can do to gain credibility for your business is to get third-party validation of your business or concept. The best way to accomplish this is through public relations. Once you get your company featured in a few articles, you can show these to potential clients, investors, and vendors, helping to further solidify your company’s brand and po sition in the marketplace. Hiring a PR firm for a small business or startup can cost as little as $3,000 per month, and is well worth the investment.

9) Remember, it’s never too late. If your existing small business doesn’t have a stellar brand, remember that it is never too late for you to rebrand your business using the above advice. If you decide to rebrand, make sure that you try to roll out your new brand all at the same time instead of peice by peice. This will help to generate excitement surrounding your new brand and will avoid creating a disparetely branded company image, consisting of stuff with your old logo and stuff with your new logo.

If you follow the above tips, you should be able to effectively create a killer brand for your startup or small business without spending tens of thousands of dollars.

Writing a business plan can seem like a piece-of-cake compared to the tedious task of creating a company name. It seems like such a trivial component, but so much of a company’s success rides on its name. Starting a business with a weak company name is kind of like driving a car — without an engine, it probably isn’t going to go anywher.

But don’t fret; PartnerUp has put together an A-to-Z guide to deciding on a stellar company name. Bear in mind the following tips and you should be able to find the perfect name for your company.

Acronyms: Be careful when using an acronym as your business name. Acronyms are often confusing and sometimes spell out unintended words.

Back-ups: Create at least two, maybe even three, back-up names for your business. When you go to register the name, your first choice may already be taken.

Competitors: Make a list of the names of your competitors. You can use their names to get ideas, but the main idea is to make sure your name is distinct from the others.

Domain Names: Make sure that the name of your company would also make an attractive domain name. And make sure that domain name isn’t already taken.

Expansion: Consider the expansion of your business. If your business were to expand, would the name still be fitting? It should be able to roll with the changes.  

First Letter: The first letter in your company name is important because it determines where your business will be listed in directories. Many companies choose to start with a number or the letter “A” to ensure early placement. This was more important in the olden days of yellow pages being a huge ingredient for success, but nonetheless remains a consideration.

Gut Feeling: Never underestimate your gut feeling about a name. You should feel very strongly about your company’s name. You are the one who has to live with it.

Headlines: Picture the name of your company splashed across the headlines. Does it look and sound good?

Industry: Make sure the name conveys the industry your business is in. Give some clues as to what exactly you do. This makes it easier for potential customers/clients to seek out your business.

Jot: Jot down a list of adverbs, adjectives, anything that could describe your business. Gather as many words as you can and then start playing around with them.

Kleenex: Even though Kleenex is used in everyday language as a tissue, it is actually a trademark. Common words like Frisbee and Rollerblade are also trademarks. If you have a product that you think is going to be big, come up with a name that could be a trademarked name used in everyday jargon.

Length: A trap that many companies fall into is trying to include too much information in the name. People don’t want to remember long-winded names, so they don’t. Your name should fit well on a business card, sign or advertisement.

Memorable: This is, by a landslide, the most important element in creating a company name. People should hear your business name and be able to commit it to memory; another reason long names don’t work.

Name (your own): Using your own name, or a combination of names for multiple owners, shows that you are willing to give your customers personal attention. But it can be difficult to make a company name with your own name memorable.

Opinion: Test your company names on friends and family. Their opinion matters—after all, they are consumers.

Pronunciation: Your company name absolutely has to be easy to pronounce. If it isn’t, people won’t even bother trying to remember it.

Quirky: So many people try to come up with quirky and weird names because they think these names will catch people’s eyes. Many times they are right, people are intrigued. Your name can certainly have personality, but it should still sound professional.

Regulations: Always make sure you check state regulations on naming a business. Also, make sure that the name of your company doesn’t sound like the name of a government entity/agency.

Spelling: The name of your company must be easy to spell. Avoid any and all confusion. If people are confused, they will immediately forget you.

Trademark: Do not teeter with someone else’s existing trademark. If there is the possibility that you could be infringing upon it, then there’s also the possibility that you could get slapped with a lawsuit.

Unique: Coming up with a unique name is always a good idea, just as long as it still adheres to the previous tips.

Visualize: As humans we innately “see” images when we read and hear language. Try to use strong visual language when naming your company.

Web site: Online businesses obviously have a Web site, but so do many other types of businesses. By creating a distinct name, you can make your name more easily searchable on search engines, resulting in more traffic.

X-factor: Okay, so “X” is a difficult letter to work with, but “x-factor” really does work here. It’s what every name should have—that certain something that makes it successful.

Yellow Pages This goes hand-in-hand with the “first letter” entry. When people search through the Yellow Pages, they almost always start at the beginning of the alphabet and work their way down. If you are in a niche industry and have few competitors then this won’t affect you much. But if your company is in, let’s say, the pizza business, and the name of your business starts with a “Z,” don’t hold your breath waiting for the phone to ring.

Zero: This is the number of customers/clients you might end up with should you not utilize any of these tips.

Editor’s Note: This post is the first in a new series that we’re doing which will contain helpful tips and advice for starting a business. Also, you can look forward to us updating the StartUp Blog a lot more often. If you have ideas for topics that you’d like to see us cover, please drop us an e-mail at startupblog@partnerup.com

How to do market research

Great ideas are left by the wayside everyday because people aren’t sure if their ideas are worth the risk. They also aren’t sure how to go about finding out if their ideas are worth the risk. Though it is no doubt a tedious task, performing market research is the only way you can thoroughly assess whether or not your business idea could be a success. Moving forward with your idea hinges on your research and assessment of the competitive marketplace. It is a necessary step in the business process. So how do you actually do it?

Well, it’s not as difficult as many people think. PartnerUp has compiled a five-step process that will guide you through the market research phase of you business. Follow these five steps and you will be well on your way to assessing the future profitability of your business.

Step 1: Evaluate the potential of your business idea.
When performing market research you must first do a quick and dirty evaluation of your business idea’s potential. Find five potential customers. They can be either people or companies, so long as they are truly representative of your target customers. Make sure each signs a non-disclose agreement, which prohibits them from sharing the information you give them and therefore protects your idea. Once that is taken care of, proceed to tell them about your product or service. Don’t overload them with information, just give them what they need to decide if they would be willing to be a customer or not. Then ask them their opinions. Would they buy your product/service? If so, why? If not, what can you do to make it better? Be sure to make it clear that you want their complete honesty.

Step 2: Perform the initial market research.
If at least one of the people or companies said they would be willing to buy your product or service, then get moving and put together some preliminary market research First type your idea, or variations of your idea, into any of the major search engines (Google, Yahoo, etc.). What you are doing here is determining if someone is already providing your product or service. Make a thorough list of each company that can be considered a competitor. Note its web address, location, product/service offering and pricing. Assemble this information on a spreadsheet.

Once the information is assembled, figure out answers to the following questions:

How many competitors are in the marketplace?

What do you think is the total sales per year for your industry?

How much market share does each competitor have?

Does it look like the companies in this market are making money?

Step 3: Find out the cost for creating your product of providing your service.
It is not enough to say that since another company can sell its product or service for a certain amount that you can sell for slightly less. That company could be improperly costing its product or service, or it could be offering the product or service at a loss. So don’t skip this step.

If you are providing a service, calculate exactly how much it will cost to provide it. Add together the direct labor costs, all of your overhead and any other costs you incur. Calculate overhead carefully. Account for phone lines, internet connectivity, computers, equipment, supplies, etc. Don’t make the mistake of underestimating the cost of providing your service.

If you are offering a product, contact engineers and contract manufacturers and have them give you prices for designing and producing your product. Add this number to your total overhead and expense. Once you have a total, make an educated guess as to how many products you expect to sell. Divide the total number of expenses by the number of products you expect to sell. That will tell you at least how much you need to sell your product for in order to make a profit.

Step 4: Find out who might sell your product.
If you’re planning on selling your product or service through a retail outfit, call the company and find out who their buyer is. Call the buyer and ask for a brief meting. Large companies like Target, Best Buy or Macy’s are actually very approachable. They have hundreds of buyers whose job it is to find the hot new trends and items. So don’t be afraid to discuss your ideas with them. If they are interested, tell them you are in the exploratory phase of you business. Then ask them a few questions. What are some rough guidelines regarding the sort of margin they expect? Do they expect co-op marketing money (which means you paying for a share of the marketing efforts)? Do they sell on consignment, or do they purchase products outright? This information should allow you to make a complete analysis.

If you’re planning on selling your product or service through a sales force, find a few salespeople in similar but non-competitive lines of business. Get together with them so that you can ask them what sorts of commissions they make, how sales are handled and what they expect for a commission and final selling price for your product or service.

If you’re planning on selling your product or service through direct marketing, call a few small to mid-sized marketing firms that specialize in direct marketing in your industry. Set up a meeting to hear about their qualifications. Ask questions and get their input on the cost of marketing your product or service. Tell them you are in the exploratory phase and want rough numbers. That way they will let their guard down and offer honest advice.

Step 5: Crunch the numbers and decide if it’s worth it.
Now it’s time to calculate all the variables. Add up the total cost of producing and offering your product or service, the selling cost (or the retailer’s margin expectation) and other expenses incurred. Now compare your cost to that of your competitors. If your product or service is more expensive, don’t immediately panic. Your product or service may be distinct from that of your competitors, in which case people may be more willing to pay extra. If your product or service is the same as your competitors, however, and is still at a higher price, consider it a red flag.

Now that you’ve thoroughly assessed the competitive marketplace, it’s time to decide whether or not it is worth moving forward with your business. Your assessment may take you a week or so to complete, but in the end you will appreciate the effort put forth.

No matter the size of the venture, all startups need one very important ingredient to start, succeed and ultimately survive–money. Some startups get it from venture capitalists or angel investors. Some lucky ventures are even built with small-business loans and grants. But if you’re panicking because you’re not getting the financing you need from these sources, relax and follow in the footsteps of successful startups like Dell Inc. or Craigslist Inc.

The founders of these famous companies pulled themselves up by their bootstraps and invested in their ventures with their own money. Bootstrapping your business, the act of avoiding external investors, means going solo in the financing department, all the while keeping expenses to a minimum.

Many business schools widely promote the use of external investors. They teach you to write a lengthy, in-depth business plan and then pitch it to investors. But burning through someone else’s money is not always an option, nor is it always the smartest route. The plain truth of the matter is that finding other people (i.e. venture capitalists, angel investors, banks, the government, etc.) who are willing to gamble their money on you is just plain unlikely.

If you’re thinking of getting a small-business loan from the bank, think again. Startups are risky endeavors, and banks are not well-know for their risk taking. In the end they are not willing to waste their money on you, so don’t waste too much of your time on them. That’s not to say that small-business loans aren’t out there for you, just don’t hold your breath. Small-business grants from the government work much the same way, except that they are even harder to come by, and the time it takes to search for them rarely pays off.

Most startups try to go the route of venture capitalists or angel investors (also know as “angels”). In 2006, venture capitalists invested $25.5 billion in startups and businesses, according to the National Venture Capital Association (NVCA). Angels put up similar numbers, investing $25.6 billion in 2006, according to the Center of Venture Research (CVR) at the University of New Hampshire. These figures are staggering, but if you take a deeper look, they are also very deceiving.

Far less than 1 percent of companies that pitch venture capitalists actually receive funding. They invest billions, but they do so for only a select number of ventures. Venture capitalists are generally interested in larger investments. Deals under $1 million are infrequent, while pricier deals occur daily. Venture capitalists are also more willing to invest money in companies that already have a solid base, not fledgling startups.

Less than 2 percent of pitches to angel investors are ever even considered. An average of 30 percent of these deals that are considered by angel investors is actually accepted, according to the CVR. Again, 30 percent sounds like a promising figure, but it also has its holes. An angel is typically an affluent individual who, much like a venture capitalist, provides capital for startups. The problem with pitching an angel, however, is that it can be very difficult to grab his or her attention, and angles usually consider very few deals.

Striking a deal with an angel is not impossible, though. To get the attention of an angle, your business should be in the same field that he or she has come from or is interested in. If your business is in the restaurant or hospitality realm, don’t pitch to an angel whose life’s work is in Internet technology. Once you’ve found your angel, the best way to get in touch with him or her is through a trusted referral (i.e. accountant, lawyer, etc.). Angels often shy away from complete strangers. When or if you do get a meeting with an angel make sure that you have three things firmly in place—a knowledgeable founder, a solid team and a sound investment for the angle. If you don’t have all three, you’re probably wasting your time.

Financing your business the conventional way—with someone else’s money—involves spending a lot of time chasing deep-pocketed investors who, when all is said and done, are statistically more likely to be uninterested than they are likely to be interested. Bootstrappers, on the other hand, focus their energy on making money and being smart with it, not raising money and wasting it.

Bootstrappers get financing in several different ways. Some of the more common forms are credit cards, personal savings, or friends and family. If you’re thinking to yourself, “Wow, that’s really risky!” You’re right. It’s very, very, very risky. But there is a reason bootstrapping is increasing in popularity.

Bootstrappers maintain a customer-focused mentality from day one. They have to. Externally funded business owners, on the other hand, are often fooled into thinking that they already have a business because they can pay salaries and rent. But the truth is you only have a business when you have paying customers. Bootstrappers have nothing to focus on but their customers. They also build cost-effective businesses right off the bat. They can’t waste much money when there isn’t much money to waste. Bootstrapping is a solid investment for anyone with the determination and brainpower to find a way to make it work.

Make no mistake; I’m not writing off the use of external investors. For some startups they are the right choice, but so few startups have that choice. Instead the majority of them are forced to start with little or no money. But don’t be discouraged, it is probably a blessing in disguise. Not only do you end up owning most, if not all that you create, you also get to run it with the freedom and flexibility that only comes with a bootstrapped business. Bootstrapping is a risky venture, but the payoff is usually worth it in the end.

And, think about how much more interested VCs, angels, and banks will be when you can call them and tell them about how much money you’re already making and how much more you would be making if you had their capital for expansion. Getting them to buy into an operating business is a lot easier than getting them to buy into a concept.

Jeremy Shoemaker, more commonly known as ShoeMoney, is a heavy hitter in the search engine marketing world. Because of his extensive knowledge and expertise he is considered one of the go-to guys in areas such as pay-per-click (PPC) and online income optimization.

Jeremy writes a well-known business blog, shoemoney.com, hosts a weekly Internet radio show called Net Income, and will release a new book this spring called the ShoeMoney Playbook. He is also the CEO of ShoeMoney Media Group.

Jeremy recently took us through what he believes are the most important phases in starting a web-based business.

Conception Phase: This is where you brainstorm and come up with the grand ideas

Functionality Phase: Can this really work? Talk to programmers/designers find out costs and really know where you are at.

Launch Phase: This is a big PR phase. You need to get the word out.

Marketing Phase: Go after low hanging fruit and find out how to get more people to your site/business.

Monetizing Phase: Once you have a good user base how can you better monetize your business.

Managing Phase: Now that everything is in place you need proper management to ensure it will keep running well while you go onto your next big thing.

Everyday people come up with thousands of great business ideas that could have produced multi-million dollar companies. But these ideas go nowhere because people aren’t sure where to begin.

The biggest excuse people use for not turning an idea into a business is that they aren’t sure if it will be successful. Instead of immediately succumbing to those fears, follow these five steps to figure out if your idea is worth taking to the next level.

1) Decide if potential customers would be willing to buy your product/service
The first step is to do a quick and dirty evaluation of whether your business idea has potential. Find five people or companies who could actually be potential customers. It is important that you make sure that these people are truly representative of your target customer, so choose wisely.

Have them sign an NDA and then tell them a bit about your product/service. Don’t use too many details, like information about your business model and competitive advantages. Just be sure to give them enough information so that they can make an informed decision as to whether or not they’d be willing to be a customer. Then, ask them for their opinions. Would they buy your product/service? If so, why? If not, is there something that you could do that would make it more appealing? Make clear to them that you want their complete honesty. You don’t want them to tell you that they would be interested if they really wouldn’t.

2) Perform some initial market research
If at least one of the five people/companies previously mentioned had said they’d be willing to buy your product, then I think your idea is worth moving forward and putting together some market research.

So many people talk about how difficult it is to perform market research. In actuality, it is anything but difficult. It is, however, a bit tedious. Start by typing your idea, or variations thereof, into any of the search engines (Google, Yahoo, Live, or Ask). Your goal here is to determine if someone else is already providing the product or service that you envision. Make a thorough list of each company that you would consider a competitor and take note of their web address, their location, their product/service offerings, and most importantly their pricing. Compile all of this information into a spreadsheet and save it!

Here are a few things to look for after you’ve compiled your list of competitors. How many competitors are in the marketplace? What do you think is the total sales per year for your industry and how much marketshare does each competitor have? Does it look like the companies in this market are making money (i.e. are they located in big beautiful buildings, or in someone’s garage)?

3) Accurately cost out how much it will cost you to create your product/service
Don’t skip this step and just say that since Company X can sell it for a certain amount of money that you can sell it for slightly less. For all you know Company X could be not properly costing their products/services and losing money on every product that they sell. Or, they could be offering this product/service as a loss leader. In any event if you skip this step, it will come back to haunt you.

If you are offering a service, calculate exactly how much money it will cost to provide your service. To come up with this number, add up direct labor costs, all of your overhead, and any other costs that you’ll incur providing your service. When calculating overhead, don’t skimp. If you work out of your home now, but will need to work from an office once you start your business, add that expense. Account for phone lines, internet connectivity, power/energy, computers, printers, copiers, equipment, supplies, etc. The biggest error that I see people make here is that, by not figuring for the expenses once they are in operation, they underestimate how much it will cost to offer their service.

If you are offering a product instead of a service, talk to a few engineers and contract manufacturers. Have them give you prices for designing/producing your product. From there you can figure out your total overhead and expenses. Finally, take a good guess as to how many products you expect to sell and amortize your overhead into each product by dividing the total annual overhead expense by the total number of units that you expect to sell.

4) Figure out who will sell your product/service and how much they’ll charge
It is important to decide who is going to sell your product/service and to establish what sort of costs will be involved in marketing and selling the product. This will vary greatly depending on whether you’ll be selling at retail, selling through a sales force, or relying on direct marketing.

If you plan to offer your product/service through a retail outfit, call the company and find out who the buyer for your product/service is. Call the buyer and ask for a 10-minute meeting. Too many people think that companies like Target, Best Buy, Macy’s, Home Depot, and others are unapproachable. In fact, they have hundreds of buyers whose job it is to find the next hot trends and items. So call them and discuss your idea. See if they have any interest. If they do, tell them that you are in the exploratory phase of launching your business. Ask them for some rough guidelines regarding what sort of margin they expect, whether they expect co-op marketing money, and whether they sell on consignment or if they purchase your products outright. This will give you all of the information that you need to complete your analysis.

If you are going to offer your products/services through a sales force, find one or two salespeople who are in a similar but non-competitive line of business. Offer to buy them lunch or coffee so that you can ask them a few questions about what sorts of commission they make, how the sales are handled, and what they might expect for a commission and final selling price on your products/services. There are very few salespeople out there who aren’t always looking for a great business/selling opportunity, so getting a meeting with them is a pretty safe bet.

Finally, if your product/services will be sold through direct marketing, call up a few smaller/mid-sized marketing firms who specialize in direct marketing in a business similar to yours. Setup a 30-minute meeting with them to hear about their qualifications. Ask about their company. Get their input on how much it would cost to market your product. Again, tell them that you are in the exploratory phase and that you’re looking for rough numbers. This usually allows people to let their guard down and offer accurate/honest advice without having to listen to the whole dog and pony show.

5) Add up the numbers and decide if you want to proceed
The final step is to add up everything—the total cost involved in producing/offering your product/service, the selling costs (or retailers margin expectation), and any other expenses that you’ll incur (on a per-unit basis). Now compare your costs to those of your competitors. Just because you may be more expensive doesn’t mean that your idea isn’t worth pursuing. If you have something that really differentiates your product/service from the competition, people may be more than willing to pay extra for your product. However, if you are offering the same widget as your competitors for a substantially higher price, then this is a red flag.
 

Now that you have the numbers and have performed a thorough assessment of the competitive marketplace, you should be ready to make a decision as to whether or not it is worth moving forward with your idea. The above research should take no more than a week, in your spare time, and you’ll eventually appreciate every second that you spent on this.

Good luck with your business!

We often hear questions from entrepreneurs who’ve found a business partner and are working on starting a business, but aren’t sure who should get what percentages of the equity in their new business. Obviously there isn’t one easy way to allocate the ownership of your new business, and there are a lot of factors to consider when assigning equity. However, this post will take a general look at the process of assigning the initial equity of a company.

1. Determine how much you and your business partners are worth

This is often one of the biggest sticking points in any partnership negotiation. Take a look at what role you and your partner(s) will be filling in the new company and try to calculate a value for each partner.

This will depend on a variety of factors, but some good questions to ask yourself are: How much time will each of you be working? Will one of you be traveling all of the time and working non-stop during their travels? How much did each of you get paid in your previous jobs? How much do comparable executives get paid in your functional area for small to mid-sized companies?

Once you’ve assessed this, look at your business plan and try to figure out how long you and your partner plan to go without salaries. Then, multiply the annual salary that each of you is worth by the number of years that you plan to be without salary. This effort that you’re putting into the company is called sweat equity and will be figured into how the equity pie gets divided.
 

2. Look at how much capital (or assets) each business partner is contributing

This can often make the biggest difference in who owns how much of the company. Look at the cash and asset contributions from each of the partners and add them all up. Make sure to include everything that gets contributed: cash, furniture and fixtures, computers, equipment, machinery, office supplies, etc. Although some might argue that the term is technically incorrect, most people refer to everything, including non-cash assets, which the partners give to the company as contributed capital.
 

3. Add everything up and calculate the ownership percentages

The last step is to add up all of the sweat equity and contributed capital to the company to get a total dollar value. Then, add up each of the partners’ contributions and divide it by the total you’ve just calculated. This should give you a percentage of ownership for each partner.
 

There can be a lot of variations here and this post isn’t meant to be all-inclusive. The main reason that I’ve written this is to demonstrate that a partnership doesn’t have to automatically be 50/50. It is perfectly reasonable to have an equal partnership, but you should definitely sit back and take a look at everything that each partner brings to the table and how much equity they are entitled to in exchange for their contribution. Also, there may be situations in which you want to give one partner more equity than another. Perhaps one partner is exposed to more risk and accordingly you feel that they are entitled to more reward. In any event, the key to this decision is to ensure that all partners feel like they are getting a fair deal and that they don’t lose interest in working for the company after the equity allocation negotiations.

Finally, before you do any deal you should always talk with an experienced attorney and accountant. People often tell me that they just can’t afford to pay an attorney or accountant for an hour of their time and my response is always the same. If you want to grow your company to be the next Microsoft or Google, wouldn’t it seem pretty foolish to potentially risk millions of dollars in the future over a few hundred dollars today?

The first step is the hardest. This statement can be applied to many things in life, but it especially applies to someone who is considering leaving corporate America to start a business or work at a startup company. I know this from my first hand experience, as I recently left a comfortable management job with a large multi national corporation that has been in business for over 100 years to come to work here at PartnerUp.

Before deciding to take the leap and go to work at a startup, I spent the last few years as a spoke in the wheel of “the corporate machine“. I was rapidly working my way up the corporate ladder and earning a decent living working in various management roles. I was constantly praised and touted as a highly productive performer in the corporation.

Then, one day I looked around and realized that I reached what I felt was the proverbial ceiling. My peers were substantially older than me and didn’t give me the respect I felt I earned and deserved. My innovative ideas where constantly falling on deaf ears. I persistently challenged my peers, and directors, for feedback on why my ideas were not considered; but my questions and inquiries were seen as being insubordinative. Time and time again I found myself unfulfilled and let down by my company. It was at this time that I made the decision to take my future and career in my own hands by leaping into the startup world.

Leaving Corporate America was not an easy decision for me to make. There are many factors to consider before you take the plunge. The biggest factor to consider is your tolerance for risk. Starting a business or working for a startup is much riskier than working for a secure, stable, and large corporation. If you and your family have a low threshold for risk working for a startup or starting your own business is probably not the best move for you. However, if you have a tolerance for risk, enjoy working hard, and have a passion for business, starting a business or working at a startup can be a great decision!

Below I have highlighted the framework that I used to make my decision to join a startup:

1. Understand what motivates you to succeed. What motivates you the most? Is it job stability or flexibility? Is it knowing you will have a steady weekly or monthly paycheck or can you wait 12 to 24 months before you make a dime? Are you capable of working 12 + hours a day? These are all questions you need to ask yourself before you make the jump.
    
2. Develop a decision matrix. Write down the pros and cons of both your current job and your new venture. If you do this honestly your decision should be easy to make.
    
3. Understand your risk tolerance. Working for a large corporation can be comfortable. Knowing that a paycheck will arrive on a regular basis is not a risky venture. Understand that there are many risks in starting your own company or going to work for a startup.
    
4. Do your homework. Prep work is key to making the right decision. Do you market and financial research up front before you take the plunge.
    
5. Trust yourself and or your partners. This is very straight forward. Trust is the key to any successful business or startup. Without trust the business or relationship will ultimately fail.

Know your risks and do your preparation up front. Keep in mind that without risk there is no return. In the end it’s the potential for the great returns that drives many of us to enter and succeed in the startup world.

I’ll be posting a follow up to this post in the next few weeks that talks about many of the financial considerations that you should be thinking about once you’ve made your personal decisions.