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Transcripts For MSNBC Your Business 20130811

hi there, everyone. i'm j.j. ramberg and welcome to "your business," the show dedicated to giving you tips and advice to help your business grow. today's story is for anyone who has had an amazing idea for a product but has no idea how to bring it to market. locker looks helps us out, taking us step by step along their path and explained how they turned a clever creation made of construction paper and scotch tape into a multimillion dollar business. turning an idea into a marketable profit can seem as simple as a spin of a when will on a child's board game. joanne brewer and christy sterling didn't even seem like players. >> this was the first time we ever did this. it was just a completely new adventure for us. it was just out of our own experience with our daughter. >> they were going into sixth grade and wanted to decorate their locker and there wasn't a lot of cute stuff out there. and so christy went to work and came up with some concepts and here we are. >> it was things i clued together in my kitchen at the table. this was an example of a little bin that was basically just cardboard paper that i grewed together. >> their daughters loved these homemade school locker decorations and so did their friends. >> the phone started ringing from other parents saying, where did you get that stuff? we want it. how do we get it? and we realized there's a market for this. there's nothing out there like it. and we should look into this as a business. >> they knew they couldn't do it themselves and so their first step was to get some help. they met with marketing consult ant kyle priest. >> if you feel you've come up with the next great idea and you're not sure what to do, it can look like a mountain to overcome. it's one of those things you do one step at a time. >> i was a little afraid to call him. i thought wow, will he even sit down with us? he met with us. >> we worked more on the tenants of the business and the goals and then put those into a planned structure. sometimes people make the mistake of grabbing a template and to completing it to create a business plan and they forget the human side of things. and the realities of how to structure a plan that they can live with. once we had the business plan in place and grand identity solid, it was time for them to get into sales mode. >> next move was to head for the dallas market center. robin wells was one of the executives in charge. >> if you have a creative product and you want to take it to market, there's several ways but bringing it to a trade show, showing as many people as you can and finding someone to help you sell it, that's what goes on here ten times a year. >> we came to the dallas market, we were overwhelmed by how much stuff was here. we were pretty clueless. the advice we did get was to try to find a manufacturing rep or sales rep that can distribute your products and that has relationship with his retailers. >> as they walked through the trade show, they found a manufacturer's rep lit listed on the fourth floor. they took their chances and asked to speak to the owner of dallas based diverse marketing. >> they just came up to my door and asked to speak with me and said they had a great idea on this little box they were carrying. i said, well, what's it all about? christy told me, i can't tell you what's in the box. >> and he said, i don't know how i can help you if i don't know what the idea is. we were very fearful at that time about disclosing, you know, any information. and so that's when he said, you know, have you heard of an nda? you know, we could sign one of those and then you could show me your idea. >> the next move for us was we had some initial meetings and we had a retailer come in that we have good relationships with, hastings out of amarillo. and showed it to her and goes, i think it's just great. i want to do an order. we said we hadn't made it yet. and she said i still want to give you an order. she left and christy and joanne looked at them and said well, i guess we have to make it now. >> the next step was manufacturing the products. they contacted the owner of dallas based china advantage. >> we are the bridge between idea and the product. so if we want to turn the idea to real production in the first stage, you have to give us a design. you have to give us a drawing. >> ray was willing to work with us at that point. not everybody would. some of the factories want you to have a certain volume, certain knowledge, certain business already established. ray was willing to take us from the start and walk us through and hold our hand and say, you guys are new. we can start with small quantities. we can tweak this. >> and we had to decide how much of the product we wanted to get made. he put his team together to source all the different products and come back with a prois. >> while the retailers were waiting to receive their orders, the next step, select a fulfillment company to do the receiving, packing and shipping of the products. that's where they landed in some trouble. >> we tried to do some due diligence and we weren't sure what criteria we should look for in a shipper. unfortunately, it was a complete disaster and they shipped about 80% of our product incorrectly in that first year. so it was a very tough year for us. >> those shipping errors nearly cost them the business. but they got back in the game when they reconnected with another shipper. craig clay of maryland based total biz fulfillmentment. >> i don't know what happened to them. all i can tell you is that if you don't have a good fu fulfillment company in place, they could receive the wrong merchandise or not in a timely manner. the way they receive that may look like it's just thrown in a box and it's damaged by the time it gets to you. >> we would look for a shipper that was acustomed to shipping to the type of retailers that we sell to. >> with their new fulfillment in place rks they landed on their first goal, on retail racks across the country and the two are ready for their next move. >> the path from having an idea to getting a product into a store can be a perilous one if you don't know how to navigate it. let's turn to folks who know the process now. the co-founder of booklings, a company that makes fashionable and functional binder covers. senior vice president multimedia editor at large for black enterprise and brad harrison is the founder and ceo of a business development firm with a venture capital fund. great to see you guys. >> good to be here. >> so, lori, you heard about these women? >> yes. >> and had an idea and followed their same process, right? >> i did. i did. we had a concept. we had to develop a business strategy from there. so we decided to do a little bit of research online. there i stumbled across locker dl lockerlookz. >> you found someone who did the research for you. >> i sure did. >> you invest in early stage companies. people must come to you and say i have this idea. i know people are going to buy it. what do i do now? >> lori's idea is probably the best thing. find the plan that's worked, look where they've had success and trouble and replicate it and improve on the processes. as long as you have a good product vision and you have identified a market that you know is a good market, you should have a lot of success. >> a great product is not a business. so many people get stuck. they're in love with this great product. everyone else tells them they love the product. scaling that product up to the point where it can be distributed through wholesalers or retailers is a whole different thing. lori figured out how to do scale up from a great idea, great product to distribution, manufacturing and fulfillment. unfortunately a lot of people were passionate about their product, get very bored. >> you didn't go to the dallas market, i take it? >> we were introduced to lockerlookz. when we had gone to the fall toy preview, i had the privilege of meeting both joanne and christy. they took me through all of their triumphs and tribulations. >> if someone wants to follow the same path but can't work with the same exact people, how do they know if they're working with the right people? >> great business partners. the failure of most businesses is having bad business partners. their stumbling block was picking a bad business partner. you want to understand what the key variables are that they want that business partner to deliver. they needed a partner that was used to fulfilling products to a specific retailer. you have to understand what those variables are and pick your partners based on that. >> you want to look at referrals, pick people who have done successfully what you want them to do with you. we don't know what the problem was with the original fulfillment provider but you want someone with a proven track record. >> the best case scenario for lori is to find an adviser or mentor like the two women that had just gone through it that can help her avoid the stumbling blocks and make introductions. >> and how do you find it? this all makes a lot of sense. i talk to people all the time. some woman in the park has a great idea. she doesn't even know where to make the first phone call. >> you have to get out there. we were reluctant to share our idea because we didn't want to get stolen or taken. the truth is that you can't get from here to there without going to conferences, without going to toy expo, because the other pieces of your puzzle are held by other people. you have to -- nondisclosure agreement signed, recognizing that sharing your idea and getting help, bringing it to market is critical. and you're not going to have all the answers. >> were you scared to share your idea? >> yes. we were absolutely nervous to do so. we also realized that it's important that in order to get this to market, we have to disclose it, we have to build relationships. networking is probably the biggest lesson we've learned. in a ten-minute conversation with somebody at a trade show it's amazing the knowledge you can gain. they help you identify the problems you could potentially face. >> when you're first starting out, you don't even know the questions to ask. you need to talk to people and find out. congratulations on your product. >> thank you. >> it looks great. thank you for the advice on this. we've been talking about what it takes to get your product on to the shelves of major retailers like walgreens and target. not long ago we spoke to representatives from those stores as well as a california business owner who successfully made his way through that proces process. >> they started out with 16 items in our store and they now have over 50. >> incredible brand and we're so excited to have them as a partner. >> walgreens and target are both saying yes to yes to ink. shannon curtain and target vice president dusty tucker jenkins say their respective customers are big fans of yes to carrots, yes to cucumbers, yes to tomatoes and yes to blue dlts berries. >> the customer following that he had developed. >> co-founder of san francisco based yes to says getting his organic skin and hair care products into major retailers was a coup. not even he could contain his excitement at first. his reaction was something like this. >> can't say that on television, unfortunately. it was oh, beep beep beep. it was really incredible. >> early on, the five-year-old company decided to approach larger retailers, despite its own humble beginnings. with a staff of about 25, working with five american production facilities, yes to currently provides products to 28,000 stores worldwide. getting to the point to pitching to perspective partners was initially somewhat of a challenge. >> we had to scramble. it was hard. we had a rough plan. >> yes to got its first big break after sinking plenty of time and money into trade shows. with some help from a contact, they got a 30--minute pitch meeting to walgreens that turned into a few hours. >> we wanted that presentation that had no questions at the end of it. the only question we wanted them to ask was when can we have it? >> while touting yes to was easy, answering questions wasn't. he says retailers want to know about a vendor's potential. >> at the end of the day, they want to know are you bringing incremental people to my store and how are you going to make sure they buy your product versus somebody else's? >> after an online trial and offer for shelf space at thousands of stores, yes to needed to ramp up production. and fast. that was, by far, one of the trickiest parts of working with a major outlet. unlike walgreens, yes to use aid different approach when introducing itself to target. >> we first met with target, we went through a broker and that broker adds a certain level of credibility to what you're doing. >> at that point, yes to was better prepared. the company had already grown to satisfy increased demand. he found some differences among retailers. he learned that each vendor gets its own deal. they're never the same. >> the relationship that you have with your mom is different than what you have with your best friend and it's the same thing here. >> it's important that we have open lines of communications, that we understand what they're expecting from us and, in turn, that we understand -- that they understand what we're expecting from them. >> even though a vendor may land a major deal, he says they must push to keep partnerships thriving and you always have to think about money. >> if people believe you're getting to 5,800 stores, allative sudden you're made. you're done. unfortunately those first couple of years you're putting that money back in. >> small business owners like him may want to rethink their major league plans until they get their minor league affairs in order. >> we didn't know which products were going to do better or worse. by starting at smaller retailers it gives you a significant advantage as you go into these major retailers that you do get it right. when we come back, how to draw attention to your business using social media. and we'll talk about the right way to negotiate. think value, value, value. ♪ i'm a hard, hard worker every day. ♪ ♪ i'm a hard, hard worker and i'm working every day. ♪ ♪ i'm a hard, hard worker and i'm saving all my pay. ♪ small businesses get up earlier and stay later. and to help all that hard work pay off, membership brings out millions of us on small business saturday and every day to make shopping small huge. this is what membership is. this is what membership does. some of us are born negotiators. most of us aren't. to so many it's intimidating and they don't know where to start. that's why stu taylor is here today. syndicated business radio shows and entrepreneur and he will give us tips on how to get the best deal in a negotiation. great to see you, stu. >> great to be here, j.j. >> you say compromise is key. should you go into a negotiation, with in the back of your mind this is where i'm willing to compromise? >> you should go into a negotiation thinking that the ultimate goal, number one, is to know what you want to do, you know what the other person wants to do and you know what you have to do to achieve your goal. reaching a resolution to achieve your objective. negotiation is an interesting process, but you know what it is? it has many faces. i used to do professional boxing, broadcasting. fighting is about styles, compromise is about styles. no two negotiations are the same. >> which make this is next idea interesting. determine what motivates. because you may not know going into a negotiation what's motivating the other side. you may have an idea and it's important to research that. once you understand that and you can have a discussion about it, perhaps there are compromises that you can make that you don't really care about, but will make them happy. >> exactly. you just said it. it is value added. every time i go into a negotiation, i'm thinking what kind of value can i give the person on the other side of the table? but you have to understand what it is a person wants. take an example. you're happily married, i assume. you think how often in every marital relationship does the man not understand the woman and the woman not understand the man? because we don't really get at the needs. you have to define what it is that the other person wants. it may not be money. some people are in it for ego. >> hopefully if you're husband and wife, it's not. >> there are different reason that is motivate people. >> understand their motivations. should you throw out the first price or not? that's the question we get the most. >> it's a great question. i don't mean to be diplomatic here but the answer is yes and no. the only time you should really throw out the first price is if you are in firm control of a negotiation and the information about the other person and you know where the marks are. if you don't and you come unarmed you have to feel your territory. but there's a couple of ways to. anchoring at a low end. for example, if a home is on the market for $500,000 and i think i want to negotiate a deal i may risk it if i negotiate it. if i offer $500,000 i might get thrown out of the negotiations. the opposite of that, the house is available for $500,000 but market is red hot. i'll come in at $550,000 so everybody walks away with an win. incrementally feel way way up the line. go to the negotiation knowing how badly do i want it and at what price will i settle. >> you mentioned this before but the value you'll provide. in some ways the value you provide may not cost you anything. >> the value you provide -- here is a perfect opportunity. i may have something of no value to me and a lot of value to you. if i have someone who's an ave id book reader, i'll bring seven, eight books and inject it in a conversation. or if i'm having difficulty in negotiations an arrangement, the person says, i only have 40 minutes, my wife is arriving at the airport, i'd say, i live near there, why don't i pick your wife up for you. bingo, deal. it's the value-added perception that will help close a deal. >> finally, don't walk away. >> if you're unable to reach an agreement, and we've seen the consequences of these with the national hockey league, ridiculous where egos get into it and it becomes power, power to excess, and we've seen it with the national basketball association, we see it with congress every day. the way to leave the situation is on good terms. don't ever walk out of a negotiation. you'll permanently damage the relationship. you might say, i'd like to think of some thingings we can do for you. let's come back in three months and sit down at the table and negotiate. >> i appreciate you coming on the program. thank you. it's likely competitors are trying to poach your marketers. five ways to energize your sales courtesy of entrepreneur.com. one, establish listening posts. you need to understand your customers' needs. two, announce special promotions. three, polish lead management. ask every new prospect where they heard about your company and make your ads trackable. four, enhance your giving. potential customers want to know you're a good corporate citizen to consider giving pro bono service. number five, freshen your content. do not let your website become static or boring. and make sure each step of your sales process is seamless. it's time to answer some of your business questions. alfred and brad are with us once again. the first question is about attracting a specific audience online. >> with the social media aspect we know how to post our product and offerings with social media but how do we draw organizations to us through social media? >> it's interesting. he's got it exactly backward. what should he be doing? >> he wants to search out those people he wants to engage in and express interest in them. posting on social media and posting your information is like going to a cocktail party and handing out flyers and walking out. you want to go in, you hoe can i help, share information and they will naturally gravitate to their content. >> i think we talked about this on this show before. social media is about an engaging conversation. that conversation has to be two ways. you have to seek out the people you want to engage and you have to understand what drives their hot buttons around that and drive conversations about that and they'll get excited and they'll reach out and start following you, too. >> it's a real art. we think of social media as free and easy, but actually if it's not natural for to you have these considerativersations, it time-consuming. >> you are most interested in those people who show interest in you. >> and it's just another network like linkedin. social media is to have a separate office. the people that rule on social media are not necessarily the people that rule on tv or print. you have to find those that can move and influence the crowds in that space. >> let's move on to the next one. a question about real estate and when you're ready to expand. >> we are now seeking to expand into other major luxury fashion markets such as manhattan, miami, l.a. and vegas. what is the one key piece of advice your experts would give me before i seek real estate locations to put my new satellite stores in. >> it's interesting. i mean, that's a big decision to go from one store to other stories in different cities across the country. what should sd she need to think about? >> we think the biggest thing is density of population arnold the area and population that matches the demographic you want to sell to. a lot of people can't afford to open up on fifth avenue or madison avenue but there's a lot of great other spots you can find in major metropolitan areas that have this same type of foot traffic. if you open up in midtown new york, that might be great during date, but there's no nighttime foot traffic. if you open up in soho, you might extend the hours -- >> you really have to understand the neighborhoods. >> you have to find a local broker that understands your busine business, retail space. >> that dove tails with what i want to say. focus on what makes these markets unique because you'll have to tail tailor your strate >> and you need a manager you can trust. your business is changing when you go from having one store here to a store you can't be at every single day. >> and l.a. and not new york, is not miami. >> that's why having a local manager from that market that understands the cultural nuances of dallas, l.a., miami, because there are cultural differences in the way people perceive the markets. >> thank you. you're a wealth of information. want to create dynamic video marketing content for your business? check out our website of the week. brainshark.com helps you create, share and track online mobile video decisions. can you take static power points you've already made and turn them into powerful rich flash videos that you can easily post online. the platform tells you who and how many people have watched your presentation, how long each viewer stayed with the show and where they're watching from. to learn more about today's show, all have you to do is click on our website. it's openforum.com/yourbusiness. you'll find all of today's segments and web exclusive content to help your business grow. can you follow us on twitter @msnbcyourbis. next week, he designs luxury one-of-a-kind fish tanks for the rich and famous. >> we're not a large company. we're a very small boutique company so i take on only the number of clients i'm able to deal with on any given moment. >> we'll see how this entrepreneur is delegating responsibilities to grow his business while still maintaining the high sanders of his brand. until them, i'm j.j. ham berg. bemake your business our business. is like hammering. riding against the wind. uphill. every day. we make money on saddles and tubes. but not on bikes. my margins are thinner than these tires. anything that gives me some breathing room makes a difference. membership helps make the most of your cashflow. i'm nelson gutierrez

Transcripts For MSNBC Your Business 20130818

present "your business" on msnbc. hi there, everyone. i'm j.j. ramberg. welcome to "your business." today is a very exciting show here at "your business" because it marks the eighth anniversary. we're kicking off our new season by devoting the entire show today to a topic we get so many questions on. funding for your small business. that's why we're going to introduce you to the founders of a company that needed some cash. rather than asking for as much money as possible, these entrepreneurs thought long and hard about the best way to grow their business. ♪ every girl crazy about a sharp dressed man ♪ >> you need to be very clear about what you're going to do with the money. it's important to know yourself, what your needs are. >> they know a thing or two about looking for investors. >> some of the hardest decisions were should we go with this investor or this other investor and who is going to make the better partner for us in the long run? >> ultimately, what are the goals for the funding? >> as they discovered, raising capital for their online business can be a full-time job. >> between doing that and running a business, it certainly -- it doesn't matter if you raise $2 million, $20 million or $200 million. it's just a long process. >> the founders of luxury men's shirt maker ledbury have closed on two rounds of funding for their four-year-old company. >> people loving the product and coming back. 65% of our customers come back between two and 35 times a year. >> the first round was for $32,000. >> rather than going to one or tw individuals, we actually prednisone it out among probably 28 initial investors. >> it quickly became clear that these entrepreneurs would need a cash infusion to expand the way they wanted. >> probably about the 12 month to 16-month mark. it was sort of the nature of the beast. >> before committing to the process, they considered these questions to make sure ledbury was ready to try new expansion strategies. >> what are the lessons we need to learn now? how much money do we need to raise to learn those lessons to scale up and grow the business forward? >> with revenue up 200% and the addition of a small retail space, they need decided to go for it. >> we had the track record running for about two years, proven that the model worked. >> the hope was to land $2 million. >> we said, let's raise enough money to be able to really test these thing that is we think are going to work to grow the business and scale it, but not have enough money that the mistakes are going to be really expensive. >> the pair had three goals in mind. at the top of their wish list was more inventory. >> to have shirts to be able to sell shirt. >> bumped up our inventory by two that we could grow 30%, 40% immediately off that supply. >> a consultant agreed that, based on demand, there was definitely room for improvement. >> said you're missing this many sales because you're out of stock this much. you need more inventory. >> with sales going up, ledbury needed a larger staff. >> we've outgrown the two of us and the couple other staff members we had. we needed to go out and get a few specialist sfwls one area of concern was customer service where employees were multitasking. >> we did a fulfillment here. they would be answering phones and the other day they would be packing boxes, trying to get ready for the fedex guy. >> promoting the ledbury brand beyond word of mouth. >> going out and getting your own customers, creating a strong digital marketing strategy for us to say, hey, we're here. we make great shirts. try them and you'll see. >> the order of their pitch was deliberate. >> not only were we raising money to address these three pillars, we're doing it in that order. >> and ledbury's business plan was being updated and improved. >> you're sharing your dream, insides and inner workings of your company with other people who are smart enough to help you out. >> not every investor said yes. >> one or two people did say no. timing wasn't right. it wasn't right for them at the right time. we still gained a lot of value from all those conversations. >> it helped that they knew what type of partner they wanted. any relationship had to be about more than just money. >> if you are in need of funding, but also in need of a little industry expertise, probably want that person that has some background and can sort of show you the ropes. >> after months of pitching, and with commitments from both old and new investors, the $2 million goal was met. they didn't want more than that either. >> it's always nice to be able to look at the bank account and say it's nice to see a good hefty amount of cash there. but i think what it is really allowed us to do is keep very focused on what we're aiming to do. >> most notable difference so far has been the inventory. >> 25% of the money we raised into beefing up our inventory, going deeper and wider. and we saw an immediate bump out of that, without putting too much risk out there. >> customer service reps no longer had to fill orders. >> we were able to outsource to a third party that is locally here in town and that's just enabled the people who should be focusing on customers to focus on customers. >> one catch has been the marketing strategy. >> there's no silver bullet but how do we get in front of more of those people? >> it's a work in progress. >> people are still trying to figure out exactly how to get that equation right. hoump are you willing to spend to go out and acquire customers, facebook advertising or google advertising? >> the pair has accomplished a great deal of what they've set out to do. it sounds like they may already be thinking about the next round of funding. >> able to test a lot of strategies and build a strong team if we do decide to go out -- put it in the right places to make it work. the folks at ledbury teach us an important lesson, knowing how much asked for is a very important factor in actually obtaining that money, particularly in later rounds. we have a great panel to deal with this investment ise. brad harrison is the founder and managing partner of scout ventures, venture capital firm focused on great ideas in entertainment, media and technology. and christian anderson is president of ka plus a, co-founder of gravity ventures. great to see you. >> good to see all of you. >> there were so many interesting points in that piece about getting money. one that really stuck out to me was the order of the way they present things to their investors. so that they said, first, we're going to use this for inventory, which is a shoo-in. give us your money and for sure you'll get money back. do you think that was the right order? >> interesting scenario, that business was already spun up and had proven out the model. people were buying the shirts. there was a market for it. this is a really easy ask to make of investors. we've launched the business. people love it. look at the trend line. we want to sell them more stuff. help us do that. we're going to use those dollars and cents for inventory. >> they were really specific about how they used the money. do you expect them to be that specific when people come to you, brad, or is it kind of i tust you, you're smart, i know you're going to do a good job with the money we give you? >> we hope that everybody is smart and we can trust them. that's the first thing in picking entrepreneurs. i think you need to know where they're going to use their money. if they haven't shown to you that they have a well thought-out plan around product investment, inventory, marketing, whatever it is, then you don't know how they're going to allocate the capital and it's not as easy of an investment decision. when you see they have a well thought out plan, okay, i understand they have the data from the initial product launch, we can now scale the business. that's what they're really selling. >> that well thought out plan can have branches. we're going to use our money for this if it doesn't work, we're going to move our money to this? >> absolutely. if they don't have flexibility -- it's important for these folks, we're going to execute on those assumptions but we're going to keep our eyes open to see if we made a wrong call, going to the left and we should be going to the right. having the ability to do that. the annals of history are full of people who had to make those decisions repeatedly. >> how do you figure out the amount you're asking for? they're talking about how they may need to go out for funding again in a year. it's very time consuming. >> so i think the issue is that a lot of entrepreneurs, first thing they do is look at how much quota as to how much money they need to get to their next milestone. whatever you think is the amount you need ask for 25% to 50% more because you want that contingency plan, if things don't go well, if the testing doesn't go well, to get things back on track. and i think in today's day and age, you're seeing companies raise an issue rev and decide they need an extension that have rev to prove out some of their hypotheses. >> spend time raising fund-raising when you actually want to be running your company. >> i would add to that, however, smart entrepreneurs are always raising money. they're either doing it passively or actively. so there's this thinking that when should i start? when should i be done? when should i get back out there? the truth of the matter is that at some be level you should always be engaged in that. >> thank you so much. it's nice to get to dive in a little deeper to get into funding. some entrepreneurs aren't worried about getting funding for their companies. deciding to use nothing but their own savings to launch their own businesses, self funded with minimal investment, these small businesses are known as ultra lights. many of them start online with a clear focus on social media in an effort to become profitable as quickly as possible. think you need millions of dollars to launch a new company? well, you don't. meet these entrepreneurs who have done it on a shoe string. >> started with pretty much -- >> we each put in $1,000. it was $2,000 start-up. >> i put in $7,000 of my own money initially into the company. >> these companies are called ultra lights, business founded with practically no capital. >> the idea is that you're not going out and seeking venture capital. it's money straight out of your own pocket sbout of the organic nature of the business and what the business is generating. >> the founder of ultra light start-ups new york says this business model is right for the times. >> investors are only giving money to successful entrepreneurs or people that already have traction. and so you need to get some traction first, starting with revenue first and then going on to scale afterwards. >> hamilton caldwell started his business, maia yogurt, on his stove in his apartment. he knew he was going at it alone. >> i gave this thing everything i had. >> leveraging the marketing power of facebook and twitter, he spends the majority of his time talking to customers at grocery stores in the new york city area and visiting the pennsylvania facility where, in ultra light fashion he has outsourced his yogurt production. >> you might start with building your own production facility and building your own testing facility. the fact that he's using a shared facility and production, is he minimizing his cost. >> also able to keep their costs down at ultra light u blanket. the pair took to the web to make blankets out of old t-shirts. >> we hired a seamstress who was able to do the sewing, manufacturing for us. >> the company's only staffers but the pair says that has actually help themd streamline their operations. customers have learned about u blanket through online searches, social media and friends and famil family. >> his business partners haven't spent $1 on advertising either. >> an online service for artists and creative people to display their work online. basically to show off what they produce. >> the sight started off. thanks to word of mouth, its popularity has grown. that allowed the tr. o to make carbon made a full-time business. >> being very frugal and keeping prices low and hoping that more and more revenue comes in every month. >> carbon made uses revenue to focus on improving the experience of the company's approximately 300,000 current users. >> you want to build a simple product. very few people to start. we basically had to launch the plan from the start. you need that kind of business model where you'll make money from day one. >> carbon made has found and success, fry admits that the ultra light model isn't perfect. the challenges that he and other entrepreneurs face are similar. >> everything may take a little longer as a self independent company. you don't have as much as access to capital. >> a career advantage. you'll know your business better than anyone else. >> it forces the best practices on you from the beginning and forces you to understand your business from a very intimate level, from the very first stage, right? you're not hiring somebody to do your marketing for you and hiring somebody to do your design for you and your engineering for you. you're doing all had an yourself. >> a good credit report is also important when it comes to asking for funding. here now are five steps you can take to improve your credit and increase your score courtesy of entrepreneur.com. one, pay your bills on time every time. late payments can cause big drops in your credit scores and are the most common piece of negative information found on people's reports. two, keep your credit card balances low. having a balance that represents 35% or more of your overall available credit limit on each card will actually hurt you. three, correct inaccuracies on your credit reports. fixing swout dated or incorrect information is a quick way to give yourself a boost. four, don't close unused accounts. the length of time you have had credit is one of the factors calculated when considering your credit. five, negotiate your creditors. instead of skipping payments or defaulting on a loan, contact your lenders as soon as a problem arises and see if they can work with you to find a resolution that's within your financial needs. there's more great advice about funding coming up on "your business." brad and christian answer your questions about the right time for a start-up to approach investors and whether crowd funding can be too impersonal. it's back to school time as i return to stanford business school to find out what you need to know about successful partnerships. is like hammering. riding against the wind. uphill. every day. we make money on saddles and tubes. but not on bikes. my margins are thinner than these tires. anything that gives me some breathing room makes a difference. membership helps make the most of your cashflow. i'm nelson gutierrez of strictly bicycles and my money works as hard as i do. this is what membership is. this is what membership does. it's time now to answer some of your business questions. brad and christian are with us once again. all of our questions fit our theme about funding. about the right time for start-ups to seek out investors. >> is it better to wait to go after investors until you actually show more value, or is it better to go after the money right away so you don't have to worry about raising money? >> it's a great question. what do you think? >> it is. it depends, right? traction is always great. and in a vacuum, more traction is better. however, you have to take into account the fact that you are burning cash while you are pursuing that traction. what you don't want to find yourself in is the untenable situation where you have no money. money equals options. when you're out of that cash, you're put in a pretty tough spot when it comes to negotiating or pursuing investing. >> it's a trade-off. you have traction, show your company is working but they know you're desperate so it balances out. >> right. >> you need to make sure that the traction and the metrics that you're showing are actually things that the investors care about. if you think you're in a vacuum, building value around your own building vacuum around metrics and your investors don't care about that date da, then you haven't made any head way. you need to talk to your investors to figure out what it is they're looking for to illustrate your success. this is about soliciting funds online versus meeting someone in person. >> with many websites now, like crowd funding sites, do you think it takes away the personal interaction with investors and prevents you from working one-on-one with investors? >> the question is do you need to connect with them one-on-one or do you just need their money? >> we have talked about this a lot. the right investor adds a lot of value. it's not just about the money. it's about the advice. it's about the relationship and the experience of those investors. you don't necessarily get that if you're just taking blind money. i would say you really need to look at where you are in your company and see, do i just need money or do i need advice? i would say most of the time you need money and advice? >> what do you think? >> i would agree. i think most of the time you need both. you just need to realize not every investor is a strategic investor. there is a role for people that just bring money to the table. with that being said, with the advances that we've seen in communication, that have been brought forward with crowd funding platforms like angels's, funders club, et cetera, funding is stream lined. so even if they are on the other side of the planet, it's easy to stay connected to keep them abreast. at the end of the day, have you to remember it's the founder's job to do a good job of communicating with investors and asking them what they need. >> let's move to the last question. it's about capital for international endeavors. >> what's the best way to make u.s.-based investors about global-focused projects? >> ideally to talk to someone who has an interest or experience in the location you're moving into in. >> do your homework. who has an appetite for those type of deals? if you're dealing with an organization with hyperfocus not global, you're barking up the wrong tree. if you find global endeavors, the end is the story. have you to connect the dots for them. some have a bad habit of showing up and expect you to get it up. need to contextualize your story for them. tailor your story for how your project or your business or your endefavor is going to alleviate that issue. >> i think it's harder to go to people like you or find people like you interested in investing in international adventures? >> we don't normally invest in international. the reason we don't is because we don't have the experience or the local relationships we think are going to add value. however, i think the point was made you really need to find the right investor that has experience. we see a lot of investors that have experience in certain regions so they take technologies from one region and specialize in another global region. i think those are probably the right investors. >> maybe you'll find another company that is not competitive to you but working in the same area. find out who their investors are. >> absolutely. >> thank you guys so much for all of your advice. very helpful. if any of you out there have a question for our experts about funding or anything else g to our website. the address is openforum.com/yourbusiness. once you get there, hit the ask the show link to submit a question to our panel. openforum.com/yourbusiness. or e-mail us at yourbusiness@msnbc.com. looking to hone your business pitch? our app of the week may be just what you need. small business perfect pitch app gives you tools to help you improve your two-minute elevator pitch. track and follow up on opportunities using the built-in calendar and also offers tips, video demonstrations and exercises that can be viewed offline. it provides web links to even more helpful online resource. 50/50, even steven, that's how a lot of people start partnerships when launching a company today. starting 50/50 can cause problems down the road. i went back to stanford for my class reunion and i sat down with some professors to get their take on the right way to do business. peter wendell, founder of cr ventures, gave me some advice on how to divide up ownership from the beginning. >> that's always the easy way, oh, let's just do it 50/50 or three founders, one-third each. but, you know, over time some businesses, the contributions of the two parties really were 50/50 but in a lot of businesses one person is interested for a year or so and then moves aside or it's obvious one person is the person who will provide the leadership and overall direction. >> how do you determine how to divide up that equity in the company if it seems, at least in the beginning or in the moment, that it's half and half? >> well, one thing that founders often don't realize is you don't have to divvy up all the equity up front. so, if you and i are going to divvy up a business together, we'll say, we'll give you each half and then divvy it up in a year. >> this is interesting. you and your partnership get a certain part of the company, you have some set aside, and then when should you revisit it, a month, a year, two years? >> generally the longer they're in the company's life, the easier it is. because if you wait until it's valuable or very big, then you're arguing, you didn't do much, i did more, those are harder discussions. entrepreneurs and business owners are well served to visit this topic from time to time. don't be totally preoccupied with it. just have an honest discussion. it's good. >> what advice do you have for someone who has six years in, ten years in, it was 50/50 and they're upset about the weight they're carrying themselves? >> well, first of all, talk about it. generally most partnerships, marital, corporate or otherwise, don't do well when people are suffering hostilities quietly. this should not be a taboo subject. it should be something okay to talk about between business owners. and if -- another technique is to vest the ownership or gradually grant it over time. so, in the beginning you initially allocate the shares and you say that, we're going to allocate 100 shares to each of us. as long as we're here for the next two or three years, then we'll own those shares at the end of that time. you know, you have an allocation, then one person decides to leave or something and half the equity just walked out the door. but one person is left to do all the work. so, there are ways to reallocate equity as a company matures. >> i'm surprised how many people are working together and have no contingency plan for what happens if you want to leave? what happens if, god forbid, something happens to me and my husband owns all the equity in the company. they don't have a buy-sell agreement. >> i wouldn't advise people do that the very first day they start. let's make sure the business is viable, has revenue, and we'll be here for a couple of years. but once we know we have something of value, let's think about what could go wrong in terms of departure and plan for that. >> all of these things, hard discussions to have, but incredibly important. >> absolutely. >> thank you so much. >> to learn more about today's show click on our website. it's openforum.com/yourbusiness. you'll find all of today's segments plus web-exclusive content with more information to help your business grow. you can also follow us on twitter @msnbcyourbiz. do not forget to be a fan shoeft on facebook. next week, ocean city, maryland, a quintessential boardwalk amusement park. changing anything like that in a place like that is hard. >> it used to be ten cent skeet ball. the public almost died when i had to switch it to a quarter. >> how this company has survived through five generations and plans to be around for the sixth. till then, i'm j.j. ramberg. remember, we make your business our business. ♪ i'm a hard, hard worker every day. ♪ ♪ i'm a hard, hard worker and i'm working every day. ♪ ♪ i'm a hard, hard worker and i'm saving all my pay. ♪ small businesses get up earlier and stay later. and to help all that hard work pay off, membership brings out millions of us on small business saturday and every day to make shopping small hug

Transcripts For MSNBC Your Business 20130824

that's why we're proud to present "your business" on msnbc. hi there, everyone. i'm j.j. ramberg, and welcome to "your business." this is a very exciting show for all of us here at "your business" because today marks the start of our eighth season. i want to take a moment to thank all of you for allowing us to be a part of your lives and your businesses. we're kicking off our new season by devoting the entire show today to a topic we get so many questions on. funding for your small business. and that's why we're going to introduce you to the founders of a company that needed some cash. rather than asking for as much money as possible, these entrepreneurs thought long and hard about the best way to grow their business. ♪ >> when you raise money, you need to be very clear about what you're going to do with the money. it's important to know yourself, what your needs are. >> they know a thing or two about looking for investors. >> some of the hardest decisions were, should we go with this investor or this other investor? and who is going to make the better partner? >> i think it goes to what are the goals for funding? >> raising capital for their online business can be a full-time job. >> between doing that and running the business. >> it doesn't matter if you raise $2 million, $20 million or $200 million, it's a process. >> the founders in richmond, virginia, have already closed on two rounds of funding for their 4-year-old company. >> the business is growing and it's been driven off people loving the product and coming back. and we've got about 65% of our customers come back between two and 35 times a year. >> the first round was for $250,000. >> we had a small friends and family round getting the business off the ground. >> rather than going to one or two individuals, we spread it out among probably 20 initial investors. >> it quickly became clear that these entrepreneurs would need a cash infusion to expand the way they wanted. >> it was probably about the 12-month to 16-month mark. it was sort of the nature of the beast. >> before committing to the process, tribble and watson considered these questions to make sure ledbury was ready. >> how much money do we need to raise to prepare ourselves to scale up and grow the business going forward? >> with revenue up about 200% and the addition of a small retail space, they decided to go for it. >> we had the track record of running for about two years. we've proven that the model worked. >> and that's how ledbury series a came to life. the hope was to land $2 million. >> we said let's raise money to be able to test these things to grow the business and scale it but not have enough money that the mistakes are going to be really expensive. >> the pair had three goals in mind when pitching to investors. at the top of their wish list was more inventory. >> to have shirts, to be able to sell shirts. we figured if we bumped up our inventory by two, we could grow 30%, 40% off the back of that supply. >> a consultant agreed that based on demand, there was definitely room for improvement. >> you know, basically, put it down on paper and said you're missing this many sales because you're out of stock this much. you just need more inventory. >> with sales going up, ledbury also needed a larger staff. >> we've outgrown the two of us and a couple other staff members we had. we needed to go out and get a few specialists. >> one area of concern was customer service where employees were multitasking. >> we did fulfillment here and the same place in our office space. they'd be answering phones and packing boxes getting ready for the fedex guy. >> and finally, the company had to figure out how to promote the brand beyond word of mouth. >> it's about getting your own customers and creating a strong digital strategy for us to say, hey, we're here. >> when talking to investors, the order of their pitch was deliberate. >> not only were we raising money to address these three pillars, but we were doing it in that order. that's sort of how we roll out the spending. >> and ledbury's business plan was being updated and improved. >> it becomes dramatically better because you're sharing your dream, the workings of your company with people smart enough to help you out. >> not every investor said yes. the pair took every no in stride. >> one or two people who said no, you know, the timing wasn't right and the shirt business wasn't right for them. but i think we gained a lot of value from those conversations. >> it helped they knew what kind of partner they wanted. any relationship had to be about more than just money. >> if you are in need of funding, but also in need of a little industry expertise, probably want that person that has some background and can sort of show you the ropes. >> after months of pitching and with commitments from old and new investors, the $2 million goal was met. they didn't want any more than that either. >> it's always nice to be able to look at the bank county and say it's nice to see a good, hefty amount of cash there. but i think what it's allowed us to do is keep very focused on what we're aiming to do. >> the most noticeable difference so far has been the inventory. >> we put, you know, 25% of the money we raised into beefing up our inventory and going deeper and wider. and we saw an immediate bump on that. gave us the opportunity to kind of test other product categories without putting too much risk out there. >> and customer service reps were no longer filling orders. >> we were able to outsource to a third party vendor here in town. and that allowed us to focus on customers. >> the one catch has been the marketing strategy. >> there's no silver bullet. but it's how do we get in front of more of those people? >> it's a work in progress. >> people in this industry today are still trying to figure out exactly how to get that equation right. how much are you willing to spend to go out and acquire customer through a channel like facebook advertising or google advertising or something like that. >> despite the challenge, the pair has accomplished a great deal of what they set out to do. and it sounds like tribble and watson may be thinking about the next round of funding. >> we'll be able to test a lot of strategies and build a strong team if we do decide to go out and raise money in a year's time, we've learned the lessons we can take that money and put it in the right places to make it work. ♪ the folks at ledbury teach us an important lesson. knowing how much to ask for is a very important factor in actually obtaining that money, particularly in later rounds. we have a great panel to deal with this investment issue. brad harrison is the founder and managing partner of scout ventures, a venture capital firm focused on great ideas in entertainment, media and technology. and christian anderson is president of a strategic design cons consultancy. there were so many interesting points in that piece, i think, about getting money. and one that really stuck out to me was the order of the way they present things to their investors. so that -- they said, first, we're going to use this for inventory, which is kind of like give us this money and for sure you'll get your money back. >> they're an interesting scenario in that business was already spun up. they'd proven out the model, right, people were buying the shirts. there was a market for it. so this is a really easy ask to make of investors. which is, hey, we've launched the business, people love it, look at the trend line, we want to sell more stuff, help us do that. and we're going to use those dollars and cents for inventory. >> they were specific how -- well, they said they were, specific about how they used the money. when people come to you, brad, do you expect them to be that specific? or is it kind of, i trust you, you're smart, i know you're going to do a good job with the money i'm giving you. >> we hope everybody we meet, whether they're smart or not we can trust them. that's the thing in picking our entrepreneurs. but i think you need to know where they're going to use their money. if they haven't shown to you they have a well thought out plan, whatever it is, then you don't know how they're going to allocate the capital and it's not as easy of an investment decision. when you see that they have a well thought out plan and you can say, okay, i understand they have this data from their initial product launch, we can now scale the business, that's what they're really -- >> and that well thought out plan could have branches, right? if "a," then "b," if they're doing a lot of testing, we're going to use our money for this, if it doesn't work, we're going to move our money to this? >> absolutely. if they don't exhibit a high level of flexibility or a bias toward that, you've got a problem from jump street. it's important for these folks to understand that you've got assumptions about what the next right move is for the business. we're going to execute on those assumptions, but we're also going to keep our eyes open if we've made a wrong call. if we're going to the left and should be going to the right. having the humility to do that. the analysts of history are full of extraordinarily successful companies that had to make those decisions repeatedly. >> let's talk about asking -- how you figure out the amount you're asking for. because they're already talking about how they may need to go out for funding again in a year. and it's very time consuming. >> so i think the issue is a lot of entrepreneurs, they look at how much equity they have to give up as opposed to how much money they need to get to their next milestone. for us, what i would say normally whatever you think is the amount you need, ask for 25% to 50% more because you want that contingency plan if things don't go well, if the testing doesn't go well, to get things back on track. and i think in today's day in age, you're seeing companies raise an initial round and need an extension of that round to better prove out some of their hypotheses. >> and the last thing you want to do is spending time raising, fund raising when you actually want to be running your company. >> right. i would add to that, however. smart entrepreneurs are always raising money. they're either doing it passively or actively. there's this thinking that when should i start? when should i be done? when should i get back out there? and the truth of the matter is, at some level, you should always be engaged in that. >> we get this question all the time. it's been nice to get to dive in a little deeper to getting funding. you know, some entrepreneurs out there aren't worried about getting funding for their companies. some small business owners have decided to do nothing but use their own savings to launch their businesses. these small businesses are known as ultra lights. many of them start online with a clear focus on social media in an effort to become profitable as quickly as possible. think you need millions of dollars to launch a new company? well, you don't. meet these entrepreneurs who have done it on a shoe string. >> started with pretty much zero dollars. >> we each put in $1,000. it was $2,000 start up. >> i put in about $7,000 of my own money. >> these companies are called ultra lights, business founded with practically no capital. >> the idea is that you're not going out and seeking venture capital. it's all money that's straight out of your pocket and out of the organic nature of the business and what the business is generating on its own. >> the founder of ultra light start-ups new york says this business model is right for the times. >> investors are only giving money to successful serial entrepreneurs or people that already have traction. you need to get some traction first and the way you do that is starting with the revenue first and going on to scale afterwards. >> hamilton caldwell started his business on the stove in his new york city apartment. he knew he was going at it alone. >> it took a little boot strapping. i gave this thing everything i had. >> while leveraging the marketing power of facebook and twitter, caldwell spends the majority of his time in the new york city area and visiting the pennsylvania facility where in ultra light fashion, he has outsourced his yogurt production. >> if you were to start a yogurt business 10 or 20 years ago, you might start with building your own production facility and building your own testing facility. and i think the fact he's using a shared kitchen and a shared facility he's able to produce his yogurt at a much lower cost. >> john and his partner brett have been able to keep costs down at their ultra light u blanket. the pair took to the web to start making blankets out of old t-shirts. they have the business up and running in no time. >> we hired a seamstress able to do the sewing and manufacturing for us and then i worked on building the site. and it was about a one-month start-up. >> the company's only staffers, but the pair says that has helped them streamline their operations. so far, customers have learned about u blanket through online searches, social media and friends and family. >> we have not spent $1 on advertisement yet. >> spencer and his business partners haven't spent $1 on advertising either. >> it's an online portfolio service for artists to display their work online. to show off what they produce. >> the site started off as a personal portfolio. and thanks to word of mouth, the popularity has grown. that allowed the trio to make carbonmade a full-time business. >> it's about keeping, being very frugal and keeping expenses low and hoping more and more revenue comes in every month. >> carbonmade uses revenue to focus on improving the experience of the company's approximately 300,000 current users. >> for an ultra light, you want to build a simple product. you have few people to start. we had to launch with a paid plan from the start. and you need that business model where you're going to make money from day one. >> while carbonmade has had success, it's not perfect. the challenges he and other entrepreneurs face are similar. >> you don't have as much access to capital. >> despite this, law ler says the ultra light model does have a clear advantage. you'll know your business better than anyone else. >> it really forces the best practices on you in the beginning. >> it forces you to understand your business, you know, from a very intimate level from the first stage, right. you're not hiring somebody to do your marketing for you and somebody to do your design for you and hire somebody to do your engineering for you. you're doing all that yourself. a good credit report is also important when it comes to asking for funding. here now are five steps you can take to improve your credit courtesy of entrepreneur.com. >> one, pay your bills on time every time. late payments can cause big drops in your credit scores and are the most common piece of negative information found on people's reports. two, keep your credit card balances low. having a balance that represents 35% or more of your overall available credit limit on each card will actually hurt you. three, correct inaccuracies on your credit reports. fixing outdated or incorrect information is a quick way to give your scores a boost. four, don't close on used accounts. the length of time you've had credit is one of the factors considering when calculating your credit. and five, negotiate with your creditors or collection agencies. instead of skipping a handful of payments or defaulting on a loan, contact your lenders as soon as a problem arises and see if they can work with you to find a resolution within your financial means. there's more great advice about funding coming up on "your business." brad and kristian answer your questions. and it's back to school time as i return to stanford business school to find out what you need to know about successful partnerships. ♪ i'm a hard, hard worker every day. ♪ ♪ i'm a hard, hard worker and i'm working every day. ♪ ♪ i'm a hard, hard worker and i'm saving all my pay. ♪ small businesses get up earlier and stay later. and to help all that hard work pay off, membership brings out millions of us on small business saturday and every day to make shopping small huge. this is what membership is. this is what membership does. time now to answer some of your business questions. and all the questions today fit our theme about funding. this first one is about the right time for start-ups to seek out investors. >> is it better to wait to go after investors until you actually show more value? or is it better to go after the money right away so you don't have to worry about raising money? >> it's a great question. what do you think? >> it is. well, it depends, traction's always great, and in a vacuum, more traction is better. you've got to take into account you're burning cash while you're pursuing traction, what you need, you're put in a tough spot when it comes to negotiating and pursuing investing. >> it's a tradeoff. you're showing your company's working but they know you're desperate. it balances out. what do you think, brad? >> well, i think you need to make sure the traction and the metrics you're showing are things that the investors care about. if you think you're in a vacuum building value around your own metrics and you meet with investors and they don't care about that data, then you haven't made any progress. what i would advise most entrepreneurs is, a, you're kind of always raising money, you need to continually talk to your investors and figure out what it is they're looking for in terms of metrics to illustrate your success. >> got it. let's move up to the next one. this one is about soliciting funds online versus meeting someone in person. >> with many websites now, do you think it takes away the personal interaction with investors and prevents you from being able to connect on a one-on-one level with investors? >> the question is do you need to connect on some of these people on one-on-one level or do you just want their money? >> i think you and i have talked about this a lot. the right investor adds a lot of value. and you need to understand it's not just about the money, it's about the advice, the relationships and the experience of those investors. you don't necessarily get that if you're just taking blind money. i would say you need to look at where you are in your company and see do i just need money or need advice? and i would say most time you need money and advice. >> not every investor is going to be a strategic investor. there's a role for people who bring money to the table. with that being said. with the advances that we've seen in communication that have been brought forth by some of these crowd funding platforms, like angel list, funders club and so forth. communication is streamlined. even if they are on the other side of the planet, it's easy to stay connected. and at the end of the day, it's the founders' job to communicate, to do a good job of communicating with investors and asking them what they need. >> let's move to the last question. it's about capital for international endeavors. >> what would be the best way to approach u.s. based foundations or investors about global focus projects? >> ideally to talk to somebody who has an interest, right, or has some experience in whatever the location you're moving into is? >> yeah. first you've got to do your homework. who has an appetite for those types of deals, right? if you're pursuing an organization that has a hyper geographic focus that's not global, you're probably barking up the wrong tree. assuming you can find organizations with an interest or appetite with funding those types of endeavors, the most important thing is the story. you've got to connect the dots for them. investors in the for profit world and the nonprofit world have a bad habit of showing up and expecting you to get it, right. you need to contextualize your story. and if they want to eradicate poverty, for example, tailor your story for how your project or your business or endeavor is going to alleviate that issue. >> do you think it's harder to go to people like you or find people like you who are interested in investing in international ventures? >> we don't usually invest in international. and the reason we don't is we don't have the experience and the local relationships we think are going to add value. however, i think the point was made that you need to find the right investor who has experience. we do see a lot of investors that have experience in certain regions and take technologies from one region and they specialize in another global region. and i think those are probably the right investors. >> and maybe, look, you find another company that is not competitive to you but working in the same area. find out who their investors are. all right. well, thank you, guys, so much for your advice. very helpful. and if any of you out there have a question for our experts about funding or anything else, go to our website. the address is openforum.com/yourbusiness. once you get there, hit the ask the show link to submit a question for our panel. that's openforum.com/yourbusiness. send us your questions and comments to yourbusiness@msnbc.com. looking to hone your business pitch? well, then our app of the week may be just what you need. the small business perfect pitch app gives you tools to help improve your two-minute elevator pitch. track and follow up on opportunities using the built-in calendar. and the app offers tips, video demonstrations and exercises that can be viewed when you're offline. finally, provides web links to more helpful online resources. 50/50, even steven, how a lot of people start partnerships when they're launching a company together. but making things 50/50 can cause big problems down the road. recently i went back to stanford business school and i sat down with professors to get their take on the right way to do business. the founder of cr ventures gave me some advice on how to divide up ownership from the beginning. >> that's always the easy way. let's just do it 50/50. or if there's three founders, 1/3 each. but over time, the contributions of the two parties really were 50/50. but in a lot of businesses, one person's interested for a year or so and then they kind of move aside or within a couple of months it's obvious that one person is really kind of the person who is going to provide the leadership and the overall direction. >> so how do you determine how to divide up that equity in the company if it seems, at least in the beginning or in the moment, that it's half and half? >> well, one thing that founders don't often realize is you don't have to divvy up all the equity up front. if you and i are going to start a business together, we'll say, all right, we'll each give ourselves 100 shares in the business but we're going to leave shares in the treasury. and then after a year, let's see how things are and what seems fair and right. >> you and your partner, you each get a certain ownership of the company. you have some set aside. and then when should you revisit it? six months, a year, two years. >> the earlier you have them in the company's life, the easier it is. if you wait until the thing is very valuable and very big and you're arguing a lot about, well, you didn't do very much and i deserve more. those are harder discussions. so entrepreneurs and small business owners are well served to visit this topic from time to time. don't be totally preoccupied with it. and just have an honest discussion. it's good. >> what advice do you have for someone who is six years in, ten years in, it was 50/50 and they're upset about the weight they're carrying themselves. >> first of all is to talk about it. generally most partnerships, marital, corporate or otherwise don't do well when people are suffering hostilities quietly. this should not be a taboo subject. it should be okay to talk about between business owners. and if -- another technique is to vest the ownership or to gradually grant it over time. so in the beginning, you initially allocate the shares and you say that we going to allocate 100 shares to each of us. and as long as we're here for the next two or three years, then we'll own those shares at the end of that time. but, you know, you have an allocation and one person decides to leave or something and half the equity walked out the door, but one person left to do all the work. so there are ways to reallocate equity as a company matures. >> i'm surprised at how many people are working together and have no contingency plan for what happens if you want to leave? what happens if, god forbid, something happens to me and my husband owns all the equity in the company. they don't have a buy/sell agreement. >> yeah, that's a really important concept. i wouldn't advise people to do that necessarily. let's make sure the business is viable. let's make sure it's going to have revenue. let's make sure it's going to be here for a couple of years. once we know we have something of value, then let's think about what could go wrong in terms of a departure and plan for that. >> all of these things, hard discussions to have but important. >> absolutely. >> thank you so much. >> to learn more about today's show, click on our website, it's openforum.com/yourbusiness. you'll find all of today's segments plus web exclusive content with more information to help your business grow. you can also follow us on twitter. and do not forget to become a fan of the show on facebook. next week, ocean city, maryland, is a century old quintessential boardwalk amusement park. changing anything in a place like that is hard. >> it used to be 10 cent ski ball and the public almost died when i had to switch it to a quarter. >> how this company has survived through five generations and plans to be around for the sixth. till then, i'm j.j. ramberg. and remember, we make your business our business. is like hammering. riding against the wind. uphill. every day. we make money on saddles and tubes. but not on bikes. my margins are thinner than these tires. anything that gives me some breathing room makes a difference. membership helps make the most of your cashflow.

Transcripts For MSNBCW Your Business 20130811

hi there, everyone. i'm j.j. ramberg and welcome to "your business," the show dedicated to giving you tips and advice to help your business grow. today's story is for anyone who has had an amazing idea for a product but has no idea how to bring it to market. locker looks helps us out, taking us step by step along their path and explained how they turned a clever creation made of construction paper and scotch tape into a multimillion dollar business. turning an idea into a marketable profit can seem as simple as a spin of a when will on a child's board game. joanne brewer and christy sterling didn't even seem like players. >> this was the first time we ever did this. it was just a completely new adventure for us. it was just out of our own experience with our daughter. >> they were going into sixth grade and wanted to decorate their locker and there wasn't a lot of cute stuff out there. and so christy went to work and came up with some concepts and here we are. >> it was things i clued together in my kitchen at the table. this was an example of a little bin that was basically just cardboard paper that i grewed together. >> their daughters loved these homemade school locker decorations and so did their friends. >> the phone started ringing from other parents saying, where did you get that stuff? we want it. how do we get it? and we realized there's a market for this. there's nothing out there like it. and we should look into this as a business. >> they knew they couldn't do it themselves and so their first step was to get some help. they met with marketing consult ant kyle priest. >> if you feel you've come up with the next great idea and you're not sure what to do, it can look like a mountain to overcome. it's one of those things you do one step at a time. >> i was a little afraid to call him. i thought wow, will he even sit down with us? he met with us. >> we worked more on the tenants of the business and the goals and then put those into a planned structure. sometimes people make the mistake of grabbing a template and to completing it to create a business plan and they forget the human side of things. and the realities of how to structure a plan that they can live with. once we had the business plan in place and grand identity solid, it was time for them to get into sales mode. >> next move was to head for the dallas market center. robin wells was one of the executives in charge. >> if you have a creative product and you want to take it to market, there's several ways but bringing it to a trade show, showing as many people as you can and finding someone to help you sell it, that's what goes on here ten times a year. >> we came to the dallas market, we were overwhelmed by how much stuff was here. we were pretty clueless. the advice we did get was to try to find a manufacturing rep or sales rep that can distribute your products and that has relationship with his retailers. >> as they walked through the trade show, they found a manufacturer's rep lit listed on the fourth floor. they took their chances and asked to speak to the owner of dallas based diverse marketing. >> they just came up to my door and asked to speak with me and said they had a great idea on this little box they were carrying. i said, well, what's it all about? christy told me, i can't tell you what's in the box. >> and he said, i don't know how i can help you if i don't know what the idea is. we were very fearful at that time about disclosing, you know, any information. and so that's when he said, you know, have you heard of an nda? you know, we could sign one of those and then you could show me your idea. >> the next move for us was we had some initial meetings and we had a retailer come in that we have good relationships with, hastings out of amarillo. and showed it to her and goes, i think it's just great. i want to do an order. we said we hadn't made it yet. and she said i still want to give you an order. she left and christy and joanne looked at them and said well, i guess we have to make it now. >> the next step was manufacturing the products. they contacted the owner of dallas based china advantage. >> we are the bridge between idea and the product. so if we want to turn the idea to real production in the first stage, you have to give us a design. you have to give us a drawing. >> ray was willing to work with us at that point. not everybody would. some of the factories want you to have a certain volume, certain knowledge, certain business already established. ray was willing to take us from the start and walk us through and hold our hand and say, you guys are new. we can start with small quantities. we can tweak this. >> and we had to decide how much of the product we wanted to get made. he put his team together to source all the different products and come back with a prois. >> while the retailers were waiting to receive their orders, the next step, select a fulfillment company to do the receiving, packing and shipping of the products. that's where they landed in some trouble. >> we tried to do some due diligence and we weren't sure what criteria we should look for in a shipper. unfortunately, it was a complete disaster and they shipped about 80% of our product incorrectly in that first year. so it was a very tough year for us. >> those shipping errors nearly cost them the business. but they got back in the game when they reconnected with another shipper. craig clay of maryland based total biz fulfillmentment. >> i don't know what happened to them. all i can tell you is that if you don't have a good fu fulfillment company in place, they could receive the wrong merchandise or not in a timely manner. the way they receive that may look like it's just thrown in a box and it's damaged by the time it gets to you. >> we would look for a shipper that was acustomed to shipping to the type of retailers that we sell to. >> with their new fulfillment in place rks they landed on their first goal, on retail racks across the country and the two are ready for their next move. >> the path from having an idea to getting a product into a store can be a perilous one if you don't know how to navigate it. let's turn to folks who know the process now. the co-founder of booklings, a company that makes fashionable and functional binder covers. senior vice president multimedia editor at large for black enterprise and brad harrison is the founder and ceo of a business development firm with a venture capital fund. great to see you guys. >> good to be here. >> so, lori, you heard about these women? >> yes. >> and had an idea and followed their same process, right? >> i did. i did. we had a concept. we had to develop a business strategy from there. so we decided to do a little bit of research online. there i stumbled across locker dl lockerlookz. >> you found someone who did the research for you. >> i sure did. >> you invest in early stage companies. people must come to you and say i have this idea. i know people are going to buy it. what do i do now? >> lori's idea is probably the best thing. find the plan that's worked, look where they've had success and trouble and replicate it and improve on the processes. as long as you have a good product vision and you have identified a market that you know is a good market, you should have a lot of success. >> a great product is not a business. so many people get stuck. they're in love with this great product. everyone else tells them they love the product. scaling that product up to the point where it can be distributed through wholesalers or retailers is a whole different thing. lori figured out how to do scale up from a great idea, great product to distribution, manufacturing and fulfillment. unfortunately a lot of people were passionate about their product, get very bored. >> you didn't go to the dallas market, i take it? >> we were introduced to lockerlookz. when we had gone to the fall toy preview, i had the privilege of meeting both joanne and christy. they took me through all of their triumphs and tribulations. >> if someone wants to follow the same path but can't work with the same exact people, how do they know if they're working with the right people? >> great business partners. the failure of most businesses is having bad business partners. their stumbling block was picking a bad business partner. you want to understand what the key variables are that they want that business partner to deliver. they needed a partner that was used to fulfilling products to a specific retailer. you have to understand what those variables are and pick your partners based on that. >> you want to look at referrals, pick people who have done successfully what you want them to do with you. we don't know what the problem was with the original fulfillment provider but you want someone with a proven track record. >> the best case scenario for lori is to find an adviser or mentor like the two women that had just gone through it that can help her avoid the stumbling blocks and make introductions. >> and how do you find it? this all makes a lot of sense. i talk to people all the time. some woman in the park has a great idea. she doesn't even know where to make the first phone call. >> you have to get out there. we were reluctant to share our idea because we didn't want to get stolen or taken. the truth is that you can't get from here to there without going to conferences, without going to toy expo, because the other pieces of your puzzle are held by other people. you have to -- nondisclosure agreement signed, recognizing that sharing your idea and getting help, bringing it to market is critical. and you're not going to have all the answers. >> were you scared to share your idea? >> yes. we were absolutely nervous to do so. we also realized that it's important that in order to get this to market, we have to disclose it, we have to build relationships. networking is probably the biggest lesson we've learned. in a ten-minute conversation with somebody at a trade show it's amazing the knowledge you can gain. they help you identify the problems you could potentially face. >> when you're first starting out, you don't even know the questions to ask. you need to talk to people and find out. congratulations on your product. >> thank you. >> it looks great. thank you for the advice on this. we've been talking about what it takes to get your product on to the shelves of major retailers like walgreens and target. not long ago we spoke to representatives from those stores as well as a california business owner who successfully made his way through that proces process. >> they started out with 16 items in our store and they now have over 50. >> incredible brand and we're so excited to have them as a partner. >> walgreens and target are both saying yes to yes to ink. shannon curtain and target vice president dusty tucker jenkins say their respective customers are big fans of yes to carrots, yes to cucumbers, yes to tomatoes and yes to blue dlts berries. >> the customer following that he had developed. >> co-founder of san francisco based yes to says getting his organic skin and hair care products into major retailers was a coup. not even he could contain his excitement at first. his reaction was something like this. >> can't say that on television, unfortunately. it was oh, beep beep beep. it was really incredible. >> early on, the five-year-old company decided to approach larger retailers, despite its own humble beginnings. with a staff of about 25, working with five american production facilities, yes to currently provides products to 28,000 stores worldwide. getting to the point to pitching to perspective partners was initially somewhat of a challenge. >> we had to scramble. it was hard. we had a rough plan. >> yes to got its first big break after sinking plenty of time and money into trade shows. with some help from a contact, they got a 30--minute pitch meeting to walgreens that turned into a few hours. >> we wanted that presentation that had no questions at the end of it. the only question we wanted them to ask was when can we have it? >> while touting yes to was easy, answering questions wasn't. he says retailers want to know about a vendor's potential. >> at the end of the day, they want to know are you bringing incremental people to my store and how are you going to make sure they buy your product versus somebody else's? >> after an online trial and offer for shelf space at thousands of stores, yes to needed to ramp up production. and fast. that was, by far, one of the trickiest parts of working with a major outlet. unlike walgreens, yes to use aid different approach when introducing itself to target. >> we first met with target, we went through a broker and that broker adds a certain level of credibility to what you're doing. >> at that point, yes to was better prepared. the company had already grown to satisfy increased demand. he found some differences among retailers. he learned that each vendor gets its own deal. they're never the same. >> the relationship that you have with your mom is different than what you have with your best friend and it's the same thing here. >> it's important that we have open lines of communications, that we understand what they're expecting from us and, in turn, that we understand -- that they understand what we're expecting from them. >> even though a vendor may land a major deal, he says they must push to keep partnerships thriving and you always have to think about money. >> if people believe you're getting to 5,800 stores, allative sudden you're made. you're done. unfortunately those first couple of years you're putting that money back in. >> small business owners like him may want to rethink their major league plans until they get their minor league affairs in order. >> we didn't know which products were going to do better or worse. by starting at smaller retailers it gives you a significant advantage as you go into these major retailers that you do get it right. when we come back, how to draw attention to your business using social media. and we'll talk about the right way to negotiate. think value, value, value. ♪ i'm a hard, hard worker every day. ♪ ♪ i'm a hard, hard worker and i'm working every day. ♪ ♪ i'm a hard, hard worker and i'm saving all my pay. ♪ small businesses get up earlier and stay later. and to help all that hard work pay off, membership brings out millions of us on small business saturday and every day to make shopping small huge. this is what membership is. this is what membership does. some of us are born negotiators. most of us aren't. to so many it's intimidating and they don't know where to start. that's why stu taylor is here today. syndicated business radio shows and entrepreneur and he will give us tips on how to get the best deal in a negotiation. great to see you, stu. >> great to be here, j.j. >> you say compromise is key. should you go into a negotiation, with in the back of your mind this is where i'm willing to compromise? >> you should go into a negotiation thinking that the ultimate goal, number one, is to know what you want to do, you know what the other person wants to do and you know what you have to do to achieve your goal. reaching a resolution to achieve your objective. negotiation is an interesting process, but you know what it is? it has many faces. i used to do professional boxing, broadcasting. fighting is about styles, compromise is about styles. no two negotiations are the same. >> which make this is next idea interesting. determine what motivates. because you may not know going into a negotiation what's motivating the other side. you may have an idea and it's important to research that. once you understand that and you can have a discussion about it, perhaps there are compromises that you can make that you don't really care about, but will make them happy. >> exactly. you just said it. it is value added. every time i go into a negotiation, i'm thinking what kind of value can i give the person on the other side of the table? but you have to understand what it is a person wants. take an example. you're happily married, i assume. you think how often in every marital relationship does the man not understand the woman and the woman not understand the man? because we don't really get at the needs. you have to define what it is that the other person wants. it may not be money. some people are in it for ego. >> hopefully if you're husband and wife, it's not. >> there are different reason that is motivate people. >> understand their motivations. should you throw out the first price or not? that's the question we get the most. >> it's a great question. i don't mean to be diplomatic here but the answer is yes and no. the only time you should really throw out the first price is if you are in firm control of a negotiation and the information about the other person and you know where the marks are. if you don't and you come unarmed you have to feel your territory. but there's a couple of ways to. anchoring at a low end. for example, if a home is on the market for $500,000 and i think i want to negotiate a deal i may risk it if i negotiate it. if i offer $500,000 i might get thrown out of the negotiations. the opposite of that, the house is available for $500,000 but market is red hot. i'll come in at $550,000 so everybody walks away with an win. incrementally feel way way up the line. go to the negotiation knowing how badly do i want it and at what price will i settle. >> you mentioned this before but the value you'll provide. in some ways the value you provide may not cost you anything. >> the value you provide -- here is a perfect opportunity. i may have something of no value to me and a lot of value to you. if i have someone who's an ave id book reader, i'll bring seven, eight books and inject it in a conversation. or if i'm having difficulty in negotiations an arrangement, the person says, i only have 40 minutes, my wife is arriving at the airport, i'd say, i live near there, why don't i pick your wife up for you. bingo, deal. it's the value-added perception that will help close a deal. >> finally, don't walk away. >> if you're unable to reach an agreement, and we've seen the consequences of these with the national hockey league, ridiculous where egos get into it and it becomes power, power to excess, and we've seen it with the national basketball association, we see it with congress every day. the way to leave the situation is on good terms. don't ever walk out of a negotiation. you'll permanently damage the relationship. you might say, i'd like to think of some thingings we can do for you. let's come back in three months and sit down at the table and negotiate. >> i appreciate you coming on the program. thank you. it's likely competitors are trying to poach your marketers. five ways to energize your sales courtesy of entrepreneur.com. one, establish listening posts. you need to understand your customers' needs. two, announce special promotions. three, polish lead management. ask every new prospect where they heard about your company and make your ads trackable. four, enhance your giving. potential customers want to know you're a good corporate citizen to consider giving pro bono service. number five, freshen your content. do not let your website become static or boring. and make sure each step of your sales process is seamless. it's time to answer some of your business questions. alfred and brad are with us once again. the first question is about attracting a specific audience online. >> with the social media aspect we know how to post our product and offerings with social media but how do we draw organizations to us through social media? >> it's interesting. he's got it exactly backward. what should he be doing? >> he wants to search out those people he wants to engage in and express interest in them. posting on social media and posting your information is like going to a cocktail party and handing out flyers and walking out. you want to go in, you hoe can i help, share information and they will naturally gravitate to their content. >> i think we talked about this on this show before. social media is about an engaging conversation. that conversation has to be two ways. you have to seek out the people you want to engage and you have to understand what drives their hot buttons around that and drive conversations about that and they'll get excited and they'll reach out and start following you, too. >> it's a real art. we think of social media as free and easy, but actually if it's not natural for to you have these considerativersations, it time-consuming. >> you are most interested in those people who show interest in you. >> and it's just another network like linkedin. social media is to have a separate office. the people that rule on social media are not necessarily the people that rule on tv or print. you have to find those that can move and influence the crowds in that space. >> let's move on to the next one. a question about real estate and when you're ready to expand. >> we are now seeking to expand into other major luxury fashion markets such as manhattan, miami, l.a. and vegas. what is the one key piece of advice your experts would give me before i seek real estate locations to put my new satellite stores in. >> it's interesting. i mean, that's a big decision to go from one store to other stories in different cities across the country. what should sd she need to think about? >> we think the biggest thing is density of population arnold the area and population that matches the demographic you want to sell to. a lot of people can't afford to open up on fifth avenue or madison avenue but there's a lot of great other spots you can find in major metropolitan areas that have this same type of foot traffic. if you open up in midtown new york, that might be great during date, but there's no nighttime foot traffic. if you open up in soho, you might extend the hours -- >> you really have to understand the neighborhoods. >> you have to find a local broker that understands your busine business, retail space. >> that dove tails with what i want to say. focus on what makes these markets unique because you'll have to tail tailor your strate >> and you need a manager you can trust. your business is changing when you go from having one store here to a store you can't be at every single day. >> and l.a. and not new york, is not miami. >> that's why having a local manager from that market that understands the cultural nuances of dallas, l.a., miami, because there are cultural differences in the way people perceive the markets. >> thank you. you're a wealth of information. want to create dynamic video marketing content for your business? check out our website of the week. brainshark.com helps you create, share and track online mobile video decisions. can you take static power points you've already made and turn them into powerful rich flash videos that you can easily post online. the platform tells you who and how many people have watched your presentation, how long each viewer stayed with the show and where they're watching from. to learn more about today's show, all have you to do is click on our website. it's openforum.com/yourbusiness. you'll find all of today's segments and web exclusive content to help your business grow. can you follow us on twitter @msnbcyourbis. next week, he designs luxury one-of-a-kind fish tanks for the rich and famous. >> we're not a large company. we're a very small boutique company so i take on only the number of clients i'm able to deal with on any given moment. >> we'll see how this entrepreneur is delegating responsibilities to grow his business while still maintaining the high sanders of his brand. until them, i'm j.j. ham berg. bemake your business our business. is like hammering. riding against the wind. uphill. every day. we make money on saddles and tubes. but not on bikes. my margins are thinner than these tires. anything that gives me some breathing room makes a difference. membership helps make the most of your cashflow. i'm nelson gutierrez of strictly bicycles and my money works as hard as i do. this is what membership is. this is what membership does. immigration reform has a new best friend, the tea party. wait, what? it is town hall season for meetings of congress. it's been the loud and aggressive demands by tea party to defund obama care even if that means shutting down federal government. you've probably seen the heated debates, including robert pittenger.

Transcripts For MSNBCW Your Business 20130818

revitalizing the economy and american express open is here to help. that's why we're proud to present "your business" on msnbc. hi there, everyone. i'm j.j. ramberg. welcome to "your business." today is a very exciting show here at "your business" because it marks the eighth anniversary. we're kicking off our new season by devoting the entire show today to a topic we get so many questions on. funding for your small business. that's why we're going to introduce you to the founders of a company that needed some cash. rather than asking for as much money as possible, these entrepreneurs thought long and hard about the best way to grow their business. ♪ every girl crazy about a sharp dressed man ♪ >> you need to be very clear about what you're going to do with the money. it's important to know yourself, what your needs are. >> they know a thing or two about looking for investors. >> some of the hardest decisions were should we go with this investor or this other investor and who is going to make the better partner for us in the long run? >> ultimately, what are the goals for the funding? >> as they discovered, raising capital for their online business can be a full-time job. >> between doing that and running a business, it certainly -- it doesn't matter if you raise $2 million, $20 million or $200 million. it's just a long process. >> the founders of luxury men's shirt maker ledbury have closed on two rounds of funding for their four-year-old company. >> people loving the product and coming back. 65% of our customers come back between two and 35 times a year. >> the first round was for $32,000. >> rather than going to one or tw individuals, we actually prednisone it out among probably 28 initial investors. >> it quickly became clear that these entrepreneurs would need a cash infusion to expand the way they wanted. >> probably about the 12 month to 16-month mark. it was sort of the nature of the beast. >> before committing to the process, they considered these questions to make sure ledbury was ready to try new expansion strategies. >> what are the lessons we need to learn now? how much money do we need to raise to learn those lessons to scale up and grow the business forward? >> with revenue up 200% and the addition of a small retail space, they need decided to go for it. >> we had the track record running for about two years, proven that the model worked. >> the hope was to land $2 million. >> we said, let's raise enough money to be able to really test these thing that is we think are going to work to grow the business and scale it, but not have enough money that the mistakes are going to be really expensive. >> the pair had three goals in mind. at the top of their wish list was more inventory. >> to have shirts to be able to sell shirt. >> bumped up our inventory by two that we could grow 30%, 40% immediately off that supply. >> a consultant agreed that, based on demand, there was definitely room for improvement. >> said you're missing this many sales because you're out of stock this much. you need more inventory. >> with sales going up, ledbury needed a larger staff. >> we've outgrown the two of us and the couple other staff members we had. we needed to go out and get a few specialist sfwls one area of concern was customer service where employees were multitasking. >> we did a fulfillment here. they would be answering phones and the other day they would be packing boxes, trying to get ready for the fedex guy. >> promoting the ledbury brand beyond word of mouth. >> going out and getting your own customers, creating a strong digital marketing strategy for us to say, hey, we're here. we make great shirts. try them and you'll see. >> the order of their pitch was deliberate. >> not only were we raising money to address these three pillars, we're doing it in that order. >> and ledbury's business plan was being updated and improved. >> you're sharing your dream, insides and inner workings of your company with other people who are smart enough to help you out. >> not every investor said yes. >> one or two people did say no. timing wasn't right. it wasn't right for them at the right time. we still gained a lot of value from all those conversations. >> it helped that they knew what type of partner they wanted. any relationship had to be about more than just money. >> if you are in need of funding, but also in need of a little industry expertise, probably want that person that has some background and can sort of show you the ropes. >> after months of pitching, and with commitments from both old and new investors, the $2 million goal was met. they didn't want more than that either. >> it's always nice to be able to look at the bank account and say it's nice to see a good hefty amount of cash there. but i think what it is really allowed us to do is keep very focused on what we're aiming to do. >> most notable difference so far has been the inventory. >> 25% of the money we raised into beefing up our inventory, going deeper and wider. and we saw an immediate bump out of that, without putting too much risk out there. >> customer service reps no longer had to fill orders. >> we were able to outsource to a third party that is locally here in town and that's just enabled the people who should be focusing on customers to focus on customers. >> one catch has been the marketing strategy. >> there's no silver bullet but how do we get in front of more of those people? >> it's a work in progress. >> people are still trying to figure out exactly how to get that equation right. hoump are you willing to spend to go out and acquire customers, facebook advertising or google advertising? >> the pair has accomplished a great deal of what they've set out to do. it sounds like they may already be thinking about the next round of funding. >> able to test a lot of strategies and build a strong team if we do decide to go out -- put it in the right places to make it work. the folks at ledbury teach us an important lesson, knowing how much asked for is a very important factor in actually obtaining that money, particularly in later rounds. we have a great panel to deal with this investment issue. brad harrison is the founder and managing partner of scout ventures, venture capital firm focused on great ideas in entertainment, media and technology. and christian anderson is president of ka plus a, co-founder of gravity ventures. great to see you. >> good to see all of you. >> there were so many interesting points in that piece about getting money. one that really stuck out to me was the order of the way they present things to their investors. so that they said, first, we're going to use this for inventory, which is a shoo-in. give us your money and for sure you'll get money back. do you think that was the right order? >> interesting scenario, that business was already spun up and had proven out the model. people were buying the shirts. there was a market for it. this is a really easy ask to make of investors. we've launched the business. people love it. look at the trend line. we want to sell them more stuff. help us do that. we're going to use those dollars and cents for inventory. >> they were really specific about how they used the money. do you expect them to be that specific when people come to you, brad, or is it kind of i tust you, you're smart, i know you're going to do a good job with the money we give you? >> we hope that everybody is smart and we can trust them. that's the first thing in picking entrepreneurs. i think you need to know where they're going to use their money. if they haven't shown to you that they have a well thought-out plan around product investment, inventory, marketing, whatever it is, then you don't know how they're going to allocate the capital and it's not as easy of an investment decision. when you see they have a well thought out plan, okay, i understand they have the data from the initial product launch, we can now scale the business. that's what they're really selling. >> that well thought out plan can have branches. we're going to use our money for this if it doesn't work, we're going to move our money to this? >> absolutely. if they don't have flexibility -- it's important for these folks, we're going to execute on those assumptions but we're going to keep our eyes open to see if we made a wrong call, going to the left and we should be going to the right. having the ability to do that. the annals of history are full of people who had to make those decisions repeatedly. >> how do you figure out the amount you're asking for? they're talking about how they may need to go out for funding again in a year. it's very time consuming. >> so i think the issue is that a lot of entrepreneurs, first thing they do is look at how much quota as to how much money they need to get to their next milestone. whatever you think is the amount you need ask for 25% to 50% more because you want that contingency plan, if things don't go well, if the testing doesn't go well, to get things back on track. and i think in today's day and age, you're seeing companies raise an issue rev and decide they need an extension that have rev to prove out some of their hypotheses. >> spend time raising fund-raising when you actually want to be running your company. >> i would add to that, however, smart entrepreneurs are always raising money. they're either doing it passively or actively. so there's this thinking that when should i start? when should i be done? when should i get back out there? the truth of the matter is that at some be level you should always be engaged in that. >> thank you so much. it's nice to get to dive in a little deeper to get into funding. some entrepreneurs aren't worried about getting funding for their companies. deciding to use nothing but their own savings to launch their own businesses, self funded with minimal investment, these small businesses are known as ultra lights. many of them start online with a clear focus on social media in an effort to become profitable as quickly as possible. think you need millions of dollars to launch a new company? well, you don't. meet these entrepreneurs who have done it on a shoe string. >> started with pretty much -- >> we each put in $1,000. it was $2,000 start-up. >> i put in $7,000 of my own money initially into the company. >> these companies are called ultra lights, business founded with practically no capital. >> the idea is that you're not going out and seeking venture capital. it's money straight out of your own pocket sbout of the organic nature of the business and what the business is generating. >> the founder of ultra light start-ups new york says this business model is right for the times. >> investors are only giving money to successful entrepreneurs or people that already have traction. and so you need to get some traction first, starting with revenue first and then going on to scale afterwards. >> hamilton caldwell started his business, maia yogurt, on his stove in his apartment. he knew he was going at it alone. >> i gave this thing everything i had. >> leveraging the marketing power of facebook and twitter, he spends the majority of his time talking to customers at grocery stores in the new york city area and visiting the pennsylvania facility where, in ultra light fashion he has outsourced his yogurt production. >> you might start with building your own production facility and building your own testing facility. the fact that he's using a shared facility and production, is he minimizing his cost. >> also able to keep their costs down at ultra light u blanket. the pair took to the web to make blankets out of old t-shirts. >> we hired a seamstress who was able to do the sewing, manufacturing for us. >> the company's only staffers but the pair says that has actually help themd streamline their operations. customers have learned about u blanket through online searches, social media and friends and famil family. >> his business partners haven't spent $1 on advertising either. >> an online service for artists and creative people to display their work online. basically to show off what they produce. >> the sight started off. thanks to word of mouth, its popularity has grown. that allowed the tr. o to make carbon made a full-time business. >> being very frugal and keeping prices low and hoping that more and more revenue comes in every month. >> carbon made uses revenue to focus on improving the experience of the company's approximately 300,000 current users. >> you want to build a simple product. very few people to start. we basically had to launch the plan from the start. you need that kind of business model where you'll make money from day one. >> carbon made has found and success, fry admits that the ultra light model isn't perfect. the challenges that he and other entrepreneurs face are similar. >> everything may take a little longer as a self independent company. you don't have as much as access to capital. >> a career advantage. you'll know your business better than anyone else. >> it forces the best practices on you from the beginning and forces you to understand your business from a very intimate level, from the very first stage, right? you're not hiring somebody to do your marketing for you and hiring somebody to do your design for you and your engineering for you. you're doing all had an yourself. >> a good credit report is also important when it comes to asking for funding. here now are five steps you can take to improve your credit and increase your score courtesy of entrepreneur.com. one, pay your bills on time every time. late payments can cause big drops in your credit scores and are the most common piece of negative information found on people's reports. two, keep your credit card balances low. having a balance that represents 35% or more of your overall available credit limit on each card will actually hurt you. three, correct inaccuracies on your credit reports. fixing swout dated or incorrect information is a quick way to give yourself a boost. four, don't close unused accounts. the length of time you have had credit is one of the factors calculated when considering your credit. five, negotiate your creditors. instead of skipping payments or defaulting on a loan, contact your lenders as soon as a problem arises and see if they can work with you to find a resolution that's within your financial needs. there's more great advice about funding coming up on "your business." brad and christian answer your questions about the right time for a start-up to approach investors and whether crowd funding can be too impersonal. it's back to school time as i return to stanford business school to find out what you need to know about successful partnerships. is like hammering. riding against the wind. uphill. every day. we make money on saddles and tubes. but not on bikes. my margins are thinner than these tires. anything that gives me some breathing room makes a difference. membership helps make the most of your cashflow. i'm nelson gutierrez of strictly bicycles and my money works as hard as i do. this is what membership is. this is what membership does. it's time now to answer some of your business questions. brad and christian are with us once again. all of our questions fit our theme about funding. about the right time for start-ups to seek out investors. >> is it better to wait to go after investors until you actually show more value, or is it better to go after the money right away so you don't have to worry about raising money? >> it's a great question. what do you think? >> it is. it depends, right? traction is always great. and in a vacuum, more traction is better. however, you have to take into account the fact that you are burning cash while you are pursuing that traction. what you don't want to find yourself in is the untenable situation where you have no money. money equals options. when you're out of that cash, you're put in a pretty tough spot when it comes to negotiating or pursuing investing. >> it's a trade-off. you have traction, show your company is working but they know you're desperate so it balances out. >> right. >> you need to make sure that the traction and the metrics that you're showing are actually things that the investors care about. if you think you're in a vacuum, building value around your own building vacuum around metrics and your investors don't care about that date da, then you haven't made any head way. you need to talk to your investors to figure out what it is they're looking for to illustrate your success. this is about soliciting funds online versus meeting someone in person. >> with many websites now, like crowd funding sites, do you think it takes away the personal interaction with investors and prevents you from working one-on-one with investors? >> the question is do you need to connect with them one-on-one or do you just need their money? >> we have talked about this a lot. the right investor adds a lot of value. it's not just about the money. it's about the advice. it's about the relationship and the experience of those investors. you don't necessarily get that if you're just taking blind money. i would say you really need to look at where you are in your company and see, do i just need money or do i need advice? i would say most of the time you need money and advice? >> what do you think? >> i would agree. i think most of the time you need both. you just need to realize not every investor is a strategic investor. there is a role for people that just bring money to the table. with that being said, with the advances that we've seen in communication, that have been brought forward with crowd funding platforms like angels's, funders club, et cetera, funding is stream lined. so even if they are on the other side of the planet, it's easy to stay connected to keep them abreast. at the end of the day, have you to remember it's the founder's job to do a good job of communicating with investors and asking them what they need. >> let's move to the last question. it's about capital for international endeavors. >> what's the best way to make u.s.-based investors about global-focused projects? >> ideally to talk to someone who has an interest or experience in the location you're moving into in. >> do your homework. who has an appetite for those type of deals? if you're dealing with an organization with hyperfocus not global, you're barking up the wrong tree. if you find global endeavors, the end is the story. have you to connect the dots for them. some have a bad habit of showing up and expect you to get it up. need to contextualize your story for them. tailor your story for how your project or your business or your endefavor is going to alleviate that issue. >> i think it's harder to go to people like you or find people like you interested in investing in international adventures? >> we don't normally invest in international. the reason we don't is because we don't have the experience or the local relationships we think are going to add value. however, i think the point was made you really need to find the right investor that has experience. we see a lot of investors that have experience in certain regions so they take technologies from one region and specialize in another global region. i think those are probably the right investors. >> maybe you'll find another company that is not competitive to you but working in the same area. find out who their investors are. >> absolutely. >> thank you guys so much for all of your advice. very helpful. if any of you out there have a question for our experts about funding or anything else g to our website. the address is openforum.com/yourbusiness. once you get there, hit the ask the show link to submit a question to our panel. openforum.com/yourbusiness. or e-mail us at yourbusiness@msnbc.com. looking to hone your business pitch? our app of the week may be just what you need. small business perfect pitch app gives you tools to help you improve your two-minute elevator pitch. track and follow up on opportunities using the built-in calendar and also offers tips, video demonstrations and exercises that can be viewed offline. it provides web links to even more helpful online resource. 50/50, even steven, that's how a lot of people start partnerships when launching a company today. starting 50/50 can cause problems down the road. i went back to stanford for my class reunion and i sat down with some professors to get their take on the right way to do business. peter wendell, founder of cr ventures, gave me some advice on how to divide up ownership from the beginning. >> that's always the easy way, oh, let's just do it 50/50 or three founders, one-third each. but, you know, over time some businesses, the contributions of the two parties really were 50/50 but in a lot of businesses one person is interested for a year or so and then moves aside or it's obvious one person is the person who will provide the leadership and overall direction. >> how do you determine how to divide up that equity in the company if it seems, at least in the beginning or in the moment, that it's half and half? >> well, one thing that founders often don't realize is you don't have to divvy up all the equity up front. so, if you and i are going to divvy up a business together, we'll say, we'll give you each half and then divvy it up in a year. >> this is interesting. you and your partnership get a certain part of the company, you have some set aside, and then when should you revisit it, a month, a year, two years? >> generally the longer they're in the company's life, the easier it is. because if you wait until it's valuable or very big, then you're arguing, you didn't do much, i did more, those are harder discussions. entrepreneurs and business owners are well served to visit this topic from time to time. don't be totally preoccupied with it. just have an honest discussion. it's good. >> what advice do you have for someone who has six years in, ten years in, it was 50/50 and they're upset about the weight they're carrying themselves? >> well, first of all, talk about it. generally most partnerships, marital, corporate or otherwise, don't do well when people are suffering hostilities quietly. this should not be a taboo subject. it should be something okay to talk about between business owners. and if -- another technique is to vest the ownership or gradually grant it over time. so, in the beginning you initially allocate the shares and you say that, we're going to allocate 100 shares to each of us. as long as we're here for the next two or three years, then we'll own those shares at the end of that time. you know, you have an allocation, then one person decides to leave or something and half the equity just walked out the door. but one person is left to do all the work. so, there are ways to reallocate equity as a company matures. >> i'm surprised how many people are working together and have no contingency plan for what happens if you want to leave? what happens if, god forbid, something happens to me and my husband owns all the equity in the company. they don't have a buy-sell agreement. >> i wouldn't advise people do that the very first day they start. let's make sure the business is viable, has revenue, and we'll be here for a couple of years. but once we know we have something of value, let's think about what could go wrong in terms of departure and plan for that. >> all of these things, hard discussions to have, but incredibly important. >> absolutely. >> thank you so much. >> to learn more about today's show click on our website. it's openforum.com/yourbusiness. you'll find all of today's segments plus web-exclusive content with more information to help your business grow. you can also follow us on twitter @msnbcyourbiz. do not forget to be a fan shoeft on facebook. next week, ocean city, maryland, a quintessential boardwalk amusement park. changing anything like that in a place like that is hard. >> it used to be ten cent skeet ball. the public almost died when i had to switch it to a quarter. >> how this company has survived through five generations and plans to be around for the sixth. till then, i'm j.j. ramberg. remember, we make your business our business. ♪ i'm a hard, hard worker every day. ♪ ♪ i'm a hard, hard worker and i'm working every day. ♪ ♪ i'm a hard, hard worker and i'm saving all my pay. ♪ small businesses get up earlier and stay later. and to help all that hard work pay off, membership brings out millions of us on small business saturday and every day to make shopping small huge. this is what membership is. this is what membership does. sflu a tough on crime politics. a thing of the past. >> we'll get to major speech eric holder delivered this week. but to get there we need to start here. >> number two pick in the '86 draft, and the commissioner, david stern. >> the boston celtics select lynn bias of the university of maryland. >> only one college basketball player in the atlantic coast conference who was more dominant than lynn

Transcripts For MSNBCW Your Business 20130824

american express open is here to help. that's why we're proud to present "your business" on msnbc. hi there, everyone. i'm j.j. ramberg, and welcome to "your business." this is a very exciting show for all of us here at "your business" because today marks the start of our eighth season. i want to take a moment to thank all of you for allowing us to be a part of your lives and your businesses. we're kicking off our new season by devoting the entire show today to a topic we get so many questions on. funding for your small business. and that's why we're going to introduce you to the founders of a company that needed some cash. rather than asking for as much money as possible, these entrepreneurs thought long and hard about the best way to grow their business. ♪ >> when you raise money, you need to be very clear about what you're going to do with the money. it's important to know yourself, what your needs are. >> they know a thing or two about looking for investors. >> some of the hardest decisions were, should we go with this investor or this other investor? and who is going to make the better partner? >> i think it goes to what are the goals for funding? >> raising capital for their online business can be a full-time job. >> between doing that and running the business. >> it doesn't matter if you raise $2 million, $20 million or $200 million, it's a process. >> the founders in richmond, virginia, have already closed on two rounds of funding for their 4-year-old company. >> the business is growing and it's been driven off people loving the product and coming back. and we've got about 65% of our customers come back between two and 35 times a year. >> the first round was for $250,000. >> we had a small friends and family round getting the business off the ground. >> rather than going to one or two individuals, we spread it out among probably 20 initial investors. >> it quickly became clear that these entrepreneurs would need a cash infusion to expand the way they wanted. >> it was probably about the 12-month to 16-month mark. it was sort of the nature of the beast. >> before committing to the process, tribble and watson considered these questions to make sure ledbury was ready. >> how much money do we need to raise to prepare ourselves to scale up and grow the business going forward? >> with revenue up about 200% and the addition of a small retail space, they decided to go for it. >> we had the track record of running for about two years. we've proven that the model worked. >> and that's how ledbury series a came to life. the hope was to land $2 million. >> we said let's raise money to be able to test these things to grow the business and scale it but not have enough money that the mistakes are going to be really expensive. >> the pair had three goals in mind when pitching to investors. at the top of their wish list was more inventory. >> to have shirts, to be able to sell shirts. we figured if we bumped up our inventory by two, we could grow 30%, 40% off the back of that supply. >> a consultant agreed that based on demand, there was definitely room for improvement. >> you know, basically, put it down on paper and said you're missing this many sales because you're out of stock this much. you just need more inventory. >> with sales going up, ledbury also needed a larger staff. >> we've outgrown the two of us and a couple other staff members we had. we needed to go out and get a few specialists. >> one area of concern was customer service where employees were multitasking. >> we did fulfillment here and the same place in our office space. they'd be answering phones and packing boxes getting ready for the fedex guy. >> and finally, the company had to figure out how to promote the brand beyond word of mouth. >> it's about getting your own customers and creating a strong digital strategy for us to say, hey, we're here. >> when talking to investors, the order of their pitch was deliberate. >> not only were we raising money to address these three pillars, but we were doing it in that order. that's sort of how we roll out the spending. >> and ledbury's business plan was being updated and improved. >> it becomes dramatically better because you're sharing your dream, the workings of your company with people smart enough to help you out. >> not every investor said yes. the pair took every no in stride. >> one or two people who said no, you know, the timing wasn't right and the shirt business wasn't right for them. but i think we gained a lot of value from those conversations. >> it helped they knew what kind of partner they wanted. any relationship had to be about more than just money. >> if you are in need of funding, but also in need of a little industry expertise, probably want that person that has some background and can sort of show you the ropes. >> after months of pitching and with commitments from old and new investors, the $2 million goal was met. they didn't want any more than that either. >> it's always nice to be able to look at the bank county and say it's nice to see a good, hefty amount of cash there. but i think what it's allowed us to do is keep very focused on what we're aiming to do. >> the most noticeable difference so far has been the inventory. >> we put, you know, 25% of the money we raised into beefing up our inventory and going deeper and wider. and we saw an immediate bump on that. gave us the opportunity to kind of test other product categories without putting too much risk out there. >> and customer service reps were no longer filling orders. >> we were able to outsource to a third party vendor here in town. and that allowed us to focus on customers. >> the one catch has been the marketing strategy. >> there's no silver bullet. but it's how do we get in front of more of those people? >> it's a work in progress. >> people in this industry today are still trying to figure out exactly how to get that equation right. how much are you willing to spend to go out and acquire customer through a channel like facebook advertising or google advertising or something like that. >> despite the challenge, the pair has accomplished a great deal of what they set out to do. and it sounds like tribble and watson may be thinking about the next round of funding. >> we'll be able to test a lot of strategies and build a strong team if we do decide to go out and raise money in a year's time, we've learned the lessons we can take that money and put it in the right places to make it work. ♪ the folks at ledbury teach us an important lesson. knowing how much to ask for is a very important factor in actually obtaining that money, particularly in later rounds. we have a great panel to deal with this investment issue. brad harrison is the founder and managing partner of scout ventures, a venture capital firm focused on great ideas in entertainment, media and technology. and christian anderson is president of a strategic design cons consultancy. there were so many interesting points in that piece, i think, about getting money. and one that really stuck out to me was the order of the way they present things to their investors. so that -- they said, first, we're going to use this for inventory, which is kind of like give us this money and for sure you'll get your money back. >> they're an interesting scenario in that business was already spun up. they'd proven out the model, right, people were buying the shirts. there was a market for it. so this is a really easy ask to make of investors. which is, hey, we've launched the business, people love it, look at the trend line, we want to sell more stuff, help us do that. and we're going to use those dollars and cents for inventory. >> they were specific how -- well, they said they were, specific about how they used the money. when people come to you, brad, do you expect them to be that specific? or is it kind of, i trust you, you're smart, i know you're going to do a good job with the money i'm giving you. >> we hope everybody we meet, whether they're smart or not we can trust them. that's the thing in picking our entrepreneurs. but i think you need to know where they're going to use their money. if they haven't shown to you they have a well thought out plan, whatever it is, then you don't know how they're going to allocate the capital and it's not as easy of an investment decision. when you see that they have a well thought out plan and you can say, okay, i understand they have this data from their initial product launch, we can now scale the business, that's what they're really -- >> and that well thought out plan could have branches, right? if "a," then "b," if they're doing a lot of testing, we're going to use our money for this, if it doesn't work, we're going to move our money to this? >> absolutely. if they don't exhibit a high level of flexibility or a bias toward that, you've got a problem from jump street. it's important for these folks to understand that you've got assumptions about what the next right move is for the business. we're going to execute on those assumptions, but we're also going to keep our eyes open if we've made a wrong call. if we're going to the left and should be going to the right. having the humility to do that. the analysts of history are full of extraordinarily successful companies that had to make those decisions repeatedly. >> let's talk about asking -- how you figure out the amount you're asking for. because they're already talking about how they may need to go out for funding again in a year. and it's very time consuming. >> so i think the issue is a lot of entrepreneurs, they look at how much equity they have to give up as opposed to how much money they need to get to their next milestone. for us, what i would say normally whatever you think is the amount you need, ask for 25% to 50% more because you want that contingency plan if things don't go well, if the testing doesn't go well, to get things back on track. and i think in today's day in age, you're seeing companies raise an initial round and need an extension of that round to better prove out some of their hypotheses. >> and the last thing you want to do is spending time raising, fund raising when you actually want to be running your company. >> right. i would add to that, however. smart entrepreneurs are always raising money. they're either doing it passively or actively. there's this thinking that when should i start? when should i be done? when should i get back out there? and the truth of the matter is, at some level, you should always be engaged in that. >> we get this question all the time. it's been nice to get to dive in a little deeper to getting funding. you know, some entrepreneurs out there aren't worried about getting funding for their companies. some small business owners have decided to do nothing but use their own savings to launch their businesses. these small businesses are known as ultra lights. many of them start online with a clear focus on social media in an effort to become profitable as quickly as possible. think you need millions of dollars to launch a new company? well, you don't. meet these entrepreneurs who have done it on a shoe string. >> started with pretty much zero dollars. >> we each put in $1,000. it was $2,000 start up. >> i put in about $7,000 of my own money. >> these companies are called ultra lights, business founded with practically no capital. >> the idea is that you're not going out and seeking venture capital. it's all money that's straight out of your pocket and out of the organic nature of the business and what the business is generating on its own. >> the founder of ultra light start-ups new york says this business model is right for the times. >> investors are only giving money to successful serial entrepreneurs or people that already have traction. you need to get some traction first and the way you do that is starting with the revenue first and going on to scale afterwards. >> hamilton caldwell started his business on the stove in his new york city apartment. he knew he was going at it alone. >> it took a little boot strapping. i gave this thing everything i had. >> while leveraging the marketing power of facebook and twitter, caldwell spends the majority of his time in the new york city area and visiting the pennsylvania facility where in ultra light fashion, he has outsourced his yogurt production. >> if you were to start a yogurt business 10 or 20 years ago, you might start with building your own production facility and building your own testing facility. and i think the fact he's using a shared kitchen and a shared facility he's able to produce his yogurt at a much lower cost. >> john and his partner brett have been able to keep costs down at their ultra light u blanket. the pair took to the web to start making blankets out of old t-shirts. they have the business up and running in no time. >> we hired a seamstress able to do the sewing and manufacturing for us and then i worked on building the site. and it was about a one-month start-up. >> the company's only staffers, but the pair says that has helped them streamline their operations. so far, customers have learned about u blanket through online searches, social media and friends and family. >> we have not spent $1 on advertisement yet. >> spencer and his business partners haven't spent $1 on advertising either. >> it's an online portfolio service for artists to display their work online. to show off what they produce. >> the site started off as a personal portfolio. and thanks to word of mouth, the popularity has grown. that allowed the trio to make carbonmade a full-time business. >> it's about keeping, being very frugal and keeping expenses low and hoping more and more revenue comes in every month. >> carbonmade uses revenue to focus on improving the experience of the company's approximately 300,000 current users. >> for an ultra light, you want to build a simple product. you have few people to start. we had to launch with a paid plan from the start. and you need that business model where you're going to make money from day one. >> while carbonmade has had success, it's not perfect. the challenges he and other entrepreneurs face are similar. >> you don't have as much access to capital. >> despite this, law ler says the ultra light model does have a clear advantage. you'll know your business better than anyone else. >> it really forces the best practices on you in the beginning. >> it forces you to understand your business, you know, from a very intimate level from the first stage, right. you're not hiring somebody to do your marketing for you and somebody to do your design for you and hire somebody to do your engineering for you. you're doing all that yourself. a good credit report is also important when it comes to asking for funding. here now are five steps you can take to improve your credit courtesy of entrepreneur.com. >> one, pay your bills on time every time. late payments can cause big drops in your credit scores and are the most common piece of negative information found on people's reports. two, keep your credit card balances low. having a balance that represents 35% or more of your overall available credit limit on each card will actually hurt you. three, correct inaccuracies on your credit reports. fixing outdated or incorrect information is a quick way to give your scores a boost. four, don't close on used accounts. the length of time you've had credit is one of the factors considering when calculating your credit. and five, negotiate with your creditors or collection agencies. instead of skipping a handful of payments or defaulting on a loan, contact your lenders as soon as a problem arises and see if they can work with you to find a resolution within your financial means. there's more great advice about funding coming up on "your business." brad and kristian answer your questions. and it's back to school time as i return to stanford business school to find out what you need to know about successful partnerships. ♪ i'm a hard, hard worker every day. ♪ ♪ i'm a hard, hard worker and i'm working every day. ♪ ♪ i'm a hard, hard worker and i'm saving all my pay. ♪ small businesses get up earlier and stay later. and to help all that hard work pay off, membership brings out millions of us on small business saturday and every day to make shopping small huge. this is what membership is. this is what membership does. time now to answer some of your business questions. and all the questions today fit our theme about funding. this first one is about the right time for start-ups to seek out investors. >> is it better to wait to go after investors until you actually show more value? or is it better to go after the money right away so you don't have to worry about raising money? >> it's a great question. what do you think? >> it is. well, it depends, traction's always great, and in a vacuum, more traction is better. you've got to take into account you're burning cash while you're pursuing traction, what you need, you're put in a tough spot when it comes to negotiating and pursuing investing. >> it's a tradeoff. you're showing your company's working but they know you're desperate. it balances out. what do you think, brad? >> well, i think you need to make sure the traction and the metrics you're showing are things that the investors care about. if you think you're in a vacuum building value around your own metrics and you meet with investors and they don't care about that data, then you haven't made any progress. what i would advise most entrepreneurs is, a, you're kind of always raising money, you need to continually talk to your investors and figure out what it is they're looking for in terms of metrics to illustrate your success. >> got it. let's move up to the next one. this one is about soliciting funds online versus meeting someone in person. >> with many websites now, do you think it takes away the personal interaction with investors and prevents you from being able to connect on a one-on-one level with investors? >> the question is do you need to connect on some of these people on one-on-one level or do you just want their money? >> i think you and i have talked about this a lot. the right investor adds a lot of value. and you need to understand it's not just about the money, it's about the advice, the relationships and the experience of those investors. you don't necessarily get that if you're just taking blind money. i would say you need to look at where you are in your company and see do i just need money or need advice? and i would say most time you need money and advice. >> not every investor is going to be a strategic investor. there's a role for people who bring money to the table. with that being said. with the advances that we've seen in communication that have been brought forth by some of these crowd funding platforms, like angel list, funders club and so forth. communication is streamlined. even if they are on the other side of the planet, it's easy to stay connected. and at the end of the day, it's the founders' job to communicate, to do a good job of communicating with investors and asking them what they need. >> let's move to the last question. it's about capital for international endeavors. >> what would be the best way to approach u.s. based foundations or investors about global focus projects? >> ideally to talk to somebody who has an interest, right, or has some experience in whatever the location you're moving into is? >> yeah. first you've got to do your homework. who has an appetite for those types of deals, right? if you're pursuing an organization that has a hyper geographic focus that's not global, you're probably barking up the wrong tree. assuming you can find organizations with an interest or appetite with funding those types of endeavors, the most important thing is the story. you've got to connect the dots for them. investors in the for profit world and the nonprofit world have a bad habit of showing up and expecting you to get it, right. you need to contextualize your story. and if they want to eradicate poverty, for example, tailor your story for how your project or your business or endeavor is going to alleviate that issue. >> do you think it's harder to go to people like you or find people like you who are interested in investing in international ventures? >> we don't usually invest in international. and the reason we don't is we don't have the experience and the local relationships we think are going to add value. however, i think the point was made that you need to find the right investor who has experience. we do see a lot of investors that have experience in certain regions and take technologies from one region and they specialize in another global region. and i think those are probably the right investors. >> and maybe, look, you find another company that is not competitive to you but working in the same area. find out who their investors are. all right. well, thank you, guys, so much for your advice. very helpful. and if any of you out there have a question for our experts about funding or anything else, go to our website. the address is openforum.com/yourbusiness. once you get there, hit the ask the show link to submit a question for our panel. that's openforum.com/yourbusiness. send us your questions and comments to yourbusiness@msnbc.com. looking to hone your business pitch? well, then our app of the week may be just what you need. the small business perfect pitch app gives you tools to help improve your two-minute elevator pitch. track and follow up on opportunities using the built-in calendar. and the app offers tips, video demonstrations and exercises that can be viewed when you're offline. finally, provides web links to more helpful online resources. 50/50, even steven, how a lot of people start partnerships when they're launching a company together. but making things 50/50 can cause big problems down the road. recently i went back to stanford business school and i sat down with professors to get their take on the right way to do business. the founder of cr ventures gave me some advice on how to divide up ownership from the beginning. >> that's always the easy way. let's just do it 50/50. or if there's three founders, 1/3 each. but over time, the contributions of the two parties really were 50/50. but in a lot of businesses, one person's interested for a year or so and then they kind of move aside or within a couple of months it's obvious that one person is really kind of the person who is going to provide the leadership and the overall direction. >> so how do you determine how to divide up that equity in the company if it seems, at least in the beginning or in the moment, that it's half and half? >> well, one thing that founders don't often realize is you don't have to divvy up all the equity up front. if you and i are going to start a business together, we'll say, all right, we'll each give ourselves 100 shares in the business but we're going to leave shares in the treasury. and then after a year, let's see how things are and what seems fair and right. >> you and your partner, you each get a certain ownership of the company. you have some set aside. and then when should you revisit it? six months, a year, two years. >> the earlier you have them in the company's life, the easier it is. if you wait until the thing is very valuable and very big and you're arguing a lot about, well, you didn't do very much and i deserve more. those are harder discussions. so entrepreneurs and small business owners are well served to visit this topic from time to time. don't be totally preoccupied with it. and just have an honest discussion. it's good. >> what advice do you have for someone who is six years in, ten years in, it was 50/50 and they're upset about the weight they're carrying themselves. >> first of all is to talk about it. generally most partnerships, marital, corporate or otherwise don't do well when people are suffering hostilities quietly. this should not be a taboo subject. it should be okay to talk about between business owners. and if -- another technique is to vest the ownership or to gradually grant it over time. so in the beginning, you initially allocate the shares and you say that we going to allocate 100 shares to each of us. and as long as we're here for the next two or three years, then we'll own those shares at the end of that time. but, you know, you have an allocation and one person decides to leave or something and half the equity walked out the door, but one person left to do all the work. so there are ways to reallocate equity as a company matures. >> i'm surprised at how many people are working together and have no contingency plan for what happens if you want to leave? what happens if, god forbid, something happens to me and my husband owns all the equity in the company. they don't have a buy/sell agreement. >> yeah, that's a really important concept. i wouldn't advise people to do that necessarily. let's make sure the business is viable. let's make sure it's going to have revenue. let's make sure it's going to be here for a couple of years. once we know we have something of value, then let's think about what could go wrong in terms of a departure and plan for that. >> all of these things, hard discussions to have but important. >> absolutely. >> thank you so much. >> to learn more about today's show, click on our website, it's openforum.com/yourbusiness. you'll find all of today's segments plus web exclusive content with more information to help your business grow. you can also follow us on twitter. and do not forget to become a fan of the show on facebook. next week, ocean city, maryland, is a century old quintessential boardwalk amusement park. changing anything in a place like that is hard. >> it used to be 10 cent ski ball and the public almost died when i had to switch it to a quarter. >> how this company has survived through five generations and plans to be around for the sixth. till then, i'm j.j. ramberg. and remember, we make your business our business. is like hammering. riding against the wind. uphill. every day. we make money on saddles and tubes. but not on bikes. my margins are thinner than these tires. anything that gives me some breathing room makes a difference. membership helps make the most of your cashflow. i'm nelson gutierrez of strictly bicycles and my money works as hard as i do. this is what membership is. this is what membership does. i have a dream. >> the day that changed america forever. the march on washington. august 28th, 1963. ♪ >> people of all race

Transcripts For MSNBCW Your Business 20160911

hi, everyone. i'm j.j. ramberg and welcome to "your business," the show dedicated to helping your small business survive, thrive, and go. imagine the thrill of getting funding for your company only to discover that you are paying interest rates that analyze to 60% or maybe 100%. a couple founders who started a bakery business that from the outside looked like it was doing great, but they were drowning under a series of loans with terrible terms they simply could not meet. we take a look at what happened to them and how you can prevent this from happening to you. known as the dessert divas in los angeles, katara and shoniji launched southern girl desserts eight years ago. inspired by their southern roots, this baking duo wowed the west coast. >> our signature dessert here is our sweet potato pie cupcake. >> that is amazing. >> within the first year of opening their doors, business was booming. so they staffed up, big time. >> we went from having one employee to literally overnight having 24 employees. everything was going great. we were probably paying out about $40,000 a month in payroll. >> but the costs of keeping up such a large staff soon proved to be problematic. >> we had overhired. so that was the first time we said we need a little help with payroll, let's just take out a loan. >> because it was a newly established business with little credit history, qualifying for a traditional bank loan was off the table. left with minimal options, the two decided to explore other kinds of loans. they had been inundated with unsolicited yet enticie ining o. >> they contact you day in day out, do you think you're in need of maybe $200,000. >> stuck with an immediate need to deliver on payroll, they decided they would work with one of the brokers who had contacted them. they took out a first loan and paid it back with no problem. but that was only a temporary fix for the looming payroll issue. they soon found they needed a second loan. without knowing it, they became fast victims of predatory lending. in a move that sent their company in a downward spiral, they needed to take out a third loan to help them pay back the second one. >> that third one was the one that sunk us. >> typically these loans are laced with confusing and misleading language. annualized interest rates and hidden broker's fees, all of which can take a business down quickly. >> the devil's in the details. they're hiding the key financial information. a lot of the information is not presented in plain english terms. >> some loan brokers are known to use abusive tactics. >> predatory lenders can be very aggressive. one hallmark is they use high pressure techniques and say you have just a couple hours to make a decision on this loan. >> they become your best friend. they're like, yeah, so, oh, you're getting married, oh, me too. they get you on that phone like they've known you since kinder garden. >> and that trust is instrumental for predatory lenders to successfully trap their prey. >> they prey on you and pounce on you. it wasn't about us. it was about all these people that we have employed. so we did whatever it was that we could do to ensure that they had checks in hand when it was time. >> at one point, the loan terms allowed their lender to dip into their business banking account on a daily basis. >> we were paying upwards of $10,000 a month. we were just drowning. we could not see any light. >> so what did you do? >> we took another loan. >> you walk through the store every day, you have this beautiful business that you built from scratch, knowing that if you lift the curtain, behind the scenes, it was a disaster. what was that like for you? >> it was horrifying. there were lights ots of tears h of our parts. we're like what in the world is about to happen here. >> it's an embarrassing situation for people to get into. >> we didn't feel like there was anywhere for us to turn. >> we don't want to throw the baby out with the bath water. capital is the life blood of small business. >> for small businesses who either find themselves victims of predatory lending or are looking for trustworthy and transparent lenders, there is help. cdfis help many small businesses access safe investment capital and empower people with crucial information about the lending process. they then eventually turned to san francisco based opportunity fund to help get them back on track. >> it was such a wonderful blessing to work with them. >> how did you get over that shame of having been taken advantage by a loan? >> it wasn't until we started sharing the story that we realized, like, we've got a lot of people like me too, you know, the hands are like, me too. >> for anyone trying to protect their business from predatory lending practices, one word of very familiar advice always seems to ring true. >> if it sounds too good to be true, it probably is. do you know what it takes to build a company that leads? growing a small business that has fiercely loyal customers and employees takes work and thoughtful planning. for the owner of a new jersey plumbing company that meant bucking all the trends to get his business to the top of its game. 20 years ago, mike was an electrician working seven days a week, 18 hours a day. >> first ten years, i always tell people it was like a hamster wheel. it was me and rob in a van, we would start early morning, end at night. >> today, gold medal service employs 128 people, has more than 100 service trucks on the road and brings in more than $20 million a year. >> what happened after ten years? >> rob came to me, he says, look i'm done, i'm out. i want to get out of business. i said, look, if you're not going to do it, i'm not going to do it. he says, no, let's make a change. let's do this. >> rob meant change their two-man operation into a different kind of business. one with employees and processes and customers. one where they would be the bosses, not the technicians. they wanted to create a company that bucked all the stereotypes. >> we know the stereotype, right? the plumber's crack, the electricians, they're going to be dirty, they're not going to be polite. >> so they looked outside their industry for inspiration. >> we started looking at models like nordstrom's, disney, zappo's. if we could take these belief systems they have and put it into our company, no one else could copy that and we'd be really unique. >> they were determined to build a business that lasts. they felt they needed a laser sharp focus on customer and employee satisfaction. they summed it up with four core l vas. >> safety first for our family and theirs. >> safety first for our family and theirs. >> yeah. >> i imagine that was very deliberate. >> it was. because our family is everybody inside our company. we care about them as much as we care for the customer. >> the second value is to deliver wow through service and exceed every customer's expectations. from simply wearing floor protectors and having tucked in shirts to suggesting ways to interact with customers. >> let's look at it in your sense when you're in front of the customer. i did my greeting, is it okay where i parked, is it okay if i put my tools right here. >> michael jackson has been with the company for five years and says he still learns something new from every one of these gatherings. >> it also helps you see things maybe in a different light sometimes. if you're going through houses constantly and you don't have intersection with someone other than the customer, sometimes you get stale and forget a step. >> to do the right thing even when nobody's watching. gilbert has been a gold medal service customer for eight years. he says it's these values that keep him coming back. >> above and beyond is the standard for them. they set high expectations for their service technicians. they don't try to oversell you. they educate you what's taking place. >> the fourth is to be a great place to work. all for one and one for all. a sentiment many of the employees never felt until they joined gold medal. >> family atmosphere. comradery between not only the upper management and the lower guys, but the technicians themselves. a lot of guys are friends in work and outside of work as well. >> from inspirational signs hanging on the wall to their values ball that they throw around at the meetings. >> lot of times we'll just kind of throw this around. wherever your thumb lands you have to say what it is. here's one on there, compliment someone. i would say, hey, j.j., this interview is amazing. i appreciate you for it. >> this isn't the kind of thing you see at most companies like theirs, but it may be soon. mike now offers classes and mentorship to other companies including competitors on how to create a winning business. >> i think any time you help other companies, you raise the bar. and when you start pulling that up, it not only pulls my company with it, it pulls theirs too. >> mike's got his army, he's got his vehicles on the ground, and he's determined to change this industry service technician by service technician. every like on instagram could be getting more exposure for your small business. entrepreneur.com gives us five tools that will help you tap into all the ways you can use instagram to raise awareness for your brand. one, use yotpo to search and collect images on instagram that are relevant to your brand. you can display them on your site to show potential customers that actual people love your product. two, prepare your posts ahead of time with buffer. you can schedule to have push notifications to set to remind you exactly when to upload your image or video. three, best buddies tells you who likes your photos the most. knowing who your biggest fans are can help you gather more information on your target customer. four, find and analyze your followers using socialrank. you can sort by geographic area, gender, or by specific keywords and hash tags. and five, minte.io helps you better engage with your customers. it feels like we are continually hearing about a major hacking. corporate, political, or retail. as we've reported, small businesses are not immune. we've developed a cybersecurity software tool to help thwart those attacks. tanya is founder and ceo of social content analytics firm and brad harrison, founder and ceo of scout ventures. >> hello. my name's matthew lewis. cybersecurity is the greatest concern for companies today. it's so easy for a hacker to infiltrate a network and steal crucial information. one of the easiest ways is through a phishing e-mail. when the victim interacts with it, they're immediately hacked and malware is installed on their computer. we custom tailor a fake phishing e-mail. when the employee interacts with it, they're enrolled into an educational module based on the severity of their intersection saying, this is what you did wrong and this is how to avoid it in the future. they can see if the employee clicked the link, enter credentials on a fake landing page, the device they were on and drill down further to see more specific data. today, i'm looking for $500,000. our foothold on the global marketplace and our high profile partners and clients. thank you. >> congratulations. good job on that pitch. >> thank you. >> let me give these to you two. i need two numbers. one, what do you think of the product, and two, what do you think of the pitch. i love this. it's almost like a secret shopper but for cybersecurity. i think it's a really neat idea. let's see what our panel thinks. brad, let's start with you. >> all right. >> are you drawing a painting over there? >> i'm giving more specification. so i thought the product's really interesting. we see this as a really big need. we're spending a lot more time focused on cybersecurity. and i think it's an elegant approach to how you educate people. in terms of your pitch, i thought it was a nine, which is the highest one i've given. i think you were clear in what you needed. so i thought it was a great job overall. >> brad's first nine. good job. tanya? >> i did an eight and a eight. i thought the pitch was really strong. you educated on the problem that businesses could experience. i would have loved for you to pepper in some examples of just how clickble these phishing e-mails are because that would get my paranoia up and the product just sounds like it's really needed. perhaps people have gotten a little lax. it really opens up the opportunity for businesses. it seems like it's a great time for this. >> if you're a small business owner, too, what seems neat is the ease of it. you just send this out to your employees and you quickly see who fell for it or not. congratulations on everything. good luck with your company. we appreciate you coming on the program. and thank you, guys, of course for your advice and feedback. if any of you out there have a product or service and you want feedback just like you saw on your chances of getting interested investors, just send us an e-mail. in that e-mail, please include a short summary of what your company does, how much money you're trying to raise, and what you intend to do with that money. we look forward to reading all about your companies and seeing some of you here in the elevator. managing your cash should be one of your top priorities as a small business owner. that includes ensuring you get paid on time. your clients may not share your same sense of urgency. we've invited greg, the ceo of invoice to go, a mobile app that makes it easy for small business even owners to track work and get paid chl. i have heard stories of companies sending invoices to big companies and filling out one part of the form wrong and not getting paid for months because the invoice gets lost in the shuffle. >> small businesses have so many cash flow issues. that's why getting a professional invoice to their customers quickly is so important. the first part is doing it digitally. not using paper and pen, not just using a microsoft word template. >> make it professional. make sure you have all the fields that you need. make sure it looks good. so someone on the other side gets it, they understand it's an official document. >> we say itemize, itemize, i m itemize. as soon as they receive it, they can get on with paying you. >> one question, it gets put in the to-do list in your client's office and that may not get to for months. whereas if they understand the bill, they pay it, it's done. >> and if they can receive it electronically that's one less thing for them to do. >> like we like all of our bills now. let's talk about keeping the terms simple. this gets to your point about making sure they understand it. >> our customers really need to speak to the person who's going to be paying them before they do the work about what the expectations are about being paid. we're really surprised how many people don't have that conversation. if you have a digital invoice, you're able to reconfirm what you've already agreed to. >> everyone understands it, they get the bill, they pay it. they don't have to put it on the, i got to call this person, figure out what this bill is. >> exactly. >> let's get the next one. >> the hardest thing for a lot of small businesses is to do their invoicing promptly. what they need to do is right when the work is done, think about all the work that they've completed and put it onto the invoice. instead of doing it on sunday night one or two weeks later where not only is it late, but you've forgotten a lot of the work that you did. >> now, you've talked about digital a bunch already in this conversation. what's wrong with sending someone something in the mail? >> if you second it in the mail, they don't get it as quickly. we have a new feature in invoice to go right now that lets you see when your customer has opened the e-mail and viewed your invoice. >> that way you also know when to follow up with them. >> exactly. >> i know you've looked at it, let me give you x amount of time. how much time do you suggest? >> whatever the amount of time that's stated on the invoice, you need to promptly follow up if you haven't yet received payment. using an app like invoice to go allows you to automate those reminders. >> and then finally, we've already talked about itemizing, but this is also client dependent. how much detail do you want. >> yes. it's really important to talk about detail. one example would be photographs. a lot of customers want to see an image of the work that's been completed. it gives them confidence that the work was done properly. with an app and being able to take pictures, you can send through images of the work that's been completed. >> is there ever too much information you can give on this involunta ininvoice? >> if you want more information here go onto the next page. >> it just saves the small business owner from having to respond to more question. >> really appreciate it. when we come utility liezin help you deal with investors and employees. and how to find a consultant that is going to help, not hurt your business. will your business be ready when growth presents itself? our new cocktail bitters were doing well, but after one tradeshow, we took off. all i could think about was our deadlines racing towards us. a loan would take too long. we needed money, now. my amex card helped me buy the ingredients to fill the orders. opportunities don't wait around, so you have to be ready for them. find out how american express cards and services can help prepare you for growth at open.com. i need to hire a consul tan and i've seen the damage that the wrong consultant can do to a company. how do i know which consultant is right for me? >> you need to hire a consultant just like an employee. do they have shared values? are they passionate about the end result you're looking for? really focus on them as if they were entering your company as an employee or even part of your family. they need to be what you want for the long-term and have share goals and outcomes. >> we now have the top two tips you need to know to help your small business grow. tonya and brad with back with us. brad you recently sold the company or one of the companies you're investing in was sold and you're helping run a few others. what makes them successful? >> the key is to forces on me trix and reporting and do that on a consistent basis. it helps you communicate with your team and everybody know what is the goals and objectives are on a weekly, monthly and annual basis and also helps you communicate with with your investors who you might need to go back to for more capital but we think that report as good the most important thing and it's a really good level of discipline to keep everybody on the same page. >> so the key is though figuring out what me tricks you want to follow and how often. these are the ones you look at daily. these are the ones you look at monthly. >> and look at your key functional areas. personnel, marketing, finance, product, technology. it keeps everybody align and everybody on the same page and helps you identify things going well but also can identify problems so you can change the way the company is acting. it's the most important thing and the difference between great entrepreneurs and those that will struggle through their businesses. >> you put together a list. these are the ones we're going to follow and then people that may be owners of one me trick or another always have a reason why it's not working. we didn't put enough resources against us or we did this or did that but at least it gives you a way to talk about it. 100%. it also sets the expectation about what you're tracking as a manager and what a team lead ought to be tracking and maybe it's the wrong me trick but if you haven't stated that up front you might be thinking success is one thing and they might be thinking another. >> sales and marketing is always arguing the product isn't where it should be or they haven't released the features on time or sometimes that's not the case. sometimes it's just that sales and market as good not properly doing -- >> but the metrics give you a jumping off point. >> and a time frame in which to see change. if you have a me trick that's not performing and you make a decision in your management team to change what you're doing you can then look at how that impacts the me trick over each week and see how you can improve the business. >> all right. you're up. >> my top tip is to tackle the hardest thing on your list first. i don't know about you but i love making lists. it brings everything out of my mind and on to a page and i can list out 25 things and get 23 done and not handle the critical two. my top tip is to start with the one you have been avoiding. the one that maybe people aren't pressuring you to do but they're critical for your business and once you have overcome that you've already had a win. you're not afraid of anything and nothing slois looming over and you can knock everything else out. >> that's the thing. if you have something on that list you know you don't want to do, its sitting right here in your gut. >> and it swells in proportion to the amount of time you sit on it as well. recently there was one thing i knew hi to do. when i finally tackled it it took me 15 minutes. hi to concentrate it and push through it but everything after that is easy. >> by the way, i love making lists also. do you like it too? >> i actually use something called follow up.cc and i manage everything in my e-mail inbox so i forward things to when i want to deal witt. >> that's interesting. >> when i want to deal with something rather than have a list i just use my inbox so it comes to me on the day i want to deal with it. >> i'm with you tonya there's such satisfaction in the. >> physical list. >> great. so good to see you both. thank you so much. this week's your biz selfie comes from tim wil let that runs kayaking ohio. this family run business rents out kayaks and helps take trips on the local sandusky river. that looks like fun. now pick up your cell phone and take a selfie of you and your business. send it to us with your name, the name of your company and location to your business@msnbc.com or tweet it to @msnbc your biz. use the #your biz selfie and we're excited to feature you here on the show. thank you so much for joining us. we'd love to hear from you. if you have any questions or comments about today's show e-mail us at your business@msnbc.com. also please visit our website. it's open forum.com/your business. we put up all the segments from today's show plus more and don't forget to connect with us on all of our digital and social media platforms too. remember, we make your business our business. will your business be ready when growth presents itself? our new cocktail bitters were doing well, but after one tradeshow, we took off. all i could think about was our deadlines racing towards us. a loan would take too long. we needed money, now. my amex card helped me buy the ingredients to fill the orders. opportunities don't wait around, so you have to be ready for them. find out how american express cards and services can help prepare you for growth at open.com.

Transcripts For MSNBCW Your Business 20160917

hi, everyone. i'm j.j. ramberg and welcome to "your business," the show dedicated to helping your small business survive, thrive, and grow. imagine the thrill of getting funding for your company only to discover to your horror that you are paying interest rates that annualize to 60% or even 100%. today, we meet two victims of small business predatory lending, a couple of founders who started a bakery business that from the outside looked like it was doing great. but they were drowning under a series of loans with terrible terms that they simply could not meet. we take a look at what happened to them and how you can prevent this from happening to you. known as the dessert divas of baldwin hills and crenshaw in los angeles, katara and shoniji launched southern girl desserts eight years ago. inspired by their southern roots, this baking duo wowed the west coast with their secret family recipes. >> our signature dessert here is our sweet potato pie cupcake. >> i didn't even try the frosting yet. that is amazing. within the first year of opening their doors, business was booming. so they staffed up, big time. >> we went from having one employee to literally overnight having 24 employees. everything was going great. we were probably paying out about $40,000 a month in payroll. >> but the costs of keeping up such a large staff soon proved to be problematic. >> we had overhired. so that was the first time we said we need a little help with payroll, let's just take out a loan. >> because southern girls desserts was a newly established business with little credit history, qualifying for a traditional bank loan was off the table. left with minimal options, the two decided to explore other kinds of loans. from day one they had been inundated with unsolicited yet enticing offers. >> when i tell you they contact you, day in and day out, do you think you're in need of $200,000? >> stuck with an immediate need to deliver on payroll, they decided they would work with one of the brokers who had contacted them. they took out a first loan and paid it back with no problem. but that was only a temporary fix for the looming payroll issue. they soon found they needed a second loan. without knowing it, they became fast victims of predatory lending. in a move that sent their company in a downward spiral, they needed to take out a third loan to help them pay back the second one. >> that third one was the one that sunk us. >> typically these loans are laced with confusing and misleading language. annualized interest rates and that can be over 100% and hidden brokers' fees, all of which can take a business down, quickly. conan knoll is the vice president of entrepreneurship at the small business majority. >> the devil's in the details. they're hiding the key financial information. a lot of the information is not presented in plain english terms. it make it difficult to understand the true cost of the loan. >> some loan brokers are known to use abusive tactics. >> predatory lenders can be very aggressive. they can e-mail, call, text. one hallmark is they use high pressure techniques and say you have just a couple hours to make a decision on this loan. >> they become your best friend. they're likeyeah, so, , you're getting married, oh, me too. they get you on that phone like they've known you since kinder kindergarten. you trust them completely. >> and that trust is instrumental for predatory lenders to successfully trap their prey. >> they know you're in such a rut and they prey on you and they pounce on you. it wasn't about us, it was about all these people we have employed. so we did whatever it was that we could do to ensure they had checks in hand. when it was time. >> at one point, the loan terms allowed their lender to dip into their business banking account on a daily basis. >> we were paying upwards of $10,000 a month. all of our cash was being eaten up. and we were just drowning. we could not see any light. >> so what did you do? >> we took another loan. >> you walked through this door every day, you have this beautiful business that you built from scratch, knowing that if you lift the curtain, behind the scenes, it was a disaster. >> uh-huh. >> what was that like for you? >> it was horrifying. there were lots of tears on both of our parts. we're like what in the world is about to happen here? >> it's an embarrassing situation for people to get into. >> we didn't feel like there was anywhere we could turn. >> the alternative market is highly unregulated. we don't want to throw the baby out with the bath water. and stifle innovation. capital is the life blood of small business. there are a lot of responsible lenders. >> for small businesses who either find themselves victims of predatory lending or are looking for trustworthy and transparent lenders, there is help. cdfis, community development financial institutions, help many small businesses access safe investment capital and you don't empower people with crucial information about the lending process. they then eventually turned to san francisco based opportunity fund to help get them back on track. >> it was such a wonderful blessing to work with them. >> how did you get over that shame of having been taken advantage by a loan? >> it wasn't until we started sharing the story that we realized, like, we've got a lot of people like, me too, you know, the hands are like, me too. >> for anyone trying to protect their business from predatory lending practices, one word of very familiar advice always seems to ring true. >> if it sounds too good to be true, it probably is. do you know what it takes to build a company that leads? growing a small business that has fiercely loyal customers and employees takes work and thoughtful planning. for the owner of a new jersey plumbing company that meant bucking all of the trends in his industry to get his business to the top of its game. ♪ 20 years ago, mike was an electrician working seven days a week, 18 hours a day. >> first ten years, i always tell people it was like a hamster wheel. it was me and rob, my business partner, in a van and we would start early morning, end at night. >> today, gold medal service that company that was once mike and rob, employs 128 people, has more than 100 service trucks on the road and brings in more than $20 million a year. what happened after ten years? >> rob came to me. he was really burnt out. he came to me and he says, look, i'm done, i'm out. i want to get out of business. i said, look, if you're not going to do it, i'm not going to do it. he says, no, let's make a change. i'm not going to go anywhere. let's do this. >> rob meant change their two-man operation into a different kind of business. one with employees and processes and more customers. one where they would be the bosses, not the technicians. they wanted to create a company that bucked all the stereotypes. >> we know the stereotype, right? the plumber's crack, the electricians, tradespeople will come, they're going to be dirty, they're not going to be polite. >> so they looked outside their industry for inspiration. >> we started looking at models like nordstrom's, disney, started to look at zappo's. we started to say, if we could take these belief systems they have and put it into our company, no one else could copy that and we'd be really unique. >> they were determined to build a business that would last. and to do that, they felt they needed to have a laser sharp focus on both customer and employee satisfaction. they summed it up with four core values that direct every single decision they make. >> core value number one is safety first for our family and theirs. >> safety first for our family and theirs. that's interesting. >> yeah. >> i imagine that was very deliberate. >> it was. because our family is everybody inside our company. we care about them as much as we care for the customer. >> the second value is to deliver wow through service and exceed every customer's expectations. mike and his team go over ideas on how to do this at every single meeting. from simply wearing floor protectors and having tucked in shirts to suggesting ways to interact with customers. >> let's look at it in your sense when you're in front of the customer. hi, mrs. jones, i did my greeting. is it okay where i parked, let me put my floor protectors on. is it okay where i put my tools right here? >> michael jackson has been with the company for five years and says he still learns something new from every one of these gatherings. >> it also helps you see things maybe in a different light sometimes. if you're going through houses constantly and you don't have interaction with someone other than the customer, sometimes you can get stale. sometimes you can forget a step. >> the third value is to always have the highest level of integrity, to do the right thing, even when nobody's watching. gilbert has been a gold medal service customer for eight years. he says it's these values that keep him coming back. >> above and beyond is the standard for them. they set high expectations for their service technicians. they don't try to oversell you. they educate you about what's taking place. >> and finally, the fourth is to be a great place to work. all for one and one for all. a sentiment many of the employees never felt until they joined gold medal. jeff describes the office as a second home. >> family atmosphere. comradery between not only the upper management and the lower guys, but the technicians themselves. a lot of guys are friends in work and outside of work as well. >> from inspirational signs hanging on the wall to their values ball that they throw around at the meetings. >> a lot of times when we have a meeting, we'll throw this around. wherever your thumb lands you have to say what it is. compliment someone. if i got this, hey, jj, you're amazing, this interview is amazing and i appreciate you for it. >> this isn't the kind of thing you see at most companies like theirs, but it may be soon. mike has been so successful growing gold medal that he now offers classes and mentorship to other companies, including competitors on how to create a winning business. >> i think any time you help other companies, you raise the bar. and when you start pulling that up, it not only pulls my company with it, it pulls theirs too. >> mike's got his army, he's got his vehicles on the ground, and he's determined to change this industry service technician by service technician. ♪ every like on instagram could be getting more exposure for your small business. entrepreneur.com gives us five tools that will help you tap into all the ways you can use instagram to raise awareness for your brand. one, use yotpo to search and collect images on instagram that are relevant to your brand. you can display them on your site to show potential customers that actual people love your product. two, prepare your posts ahead of time with buffer. you can schedule to have push notifications set to remind you exactly when to upload your image or video. three, best buddies tells you who likes your photos the most. knowing who your biggest instagram fans are can help you gather more information on your target customer and brand influen influencers. four, find and analyze your followers using socialrank. you can sort your subscribers by geographic area, gender or by specific keywords and hash tags. and five, minte.io helps you better engage with your customers. and keeps track of important stats that will help you better engage with your customers. it feels like we are continually hearing about a major hacking. corporate, political, or retail. as we've reported, small businesses are not immune. today's elevator pitcher has developed a cyber security software tool to help thwart those attacks. let's see if our judges think it's a valid deterrent. tanya is founder and ceo of social content analytics firm sharably and brad harrison is founder and ceo of scout ventures. >> hello. my name's matthew lewis. i'm president and founder of fish train. cybersecurity is the greatest concern for companies today. it's so easy for a hacker to infiltrate a network and steal crucial information. one of the easiest ways is through a phishing e-mail. when the victim interacts with it, they're immediately hacked and malware is installed on their computer. what we do at phishtrain, we custom tailor a fake phishing e-mail. when the employee interacts with it, they're enrolled into an educational module based on the severity of their intersection saying, this is what you did wrong and this is how to avoid phished in the future. back on the client end, they can see if the employee clicked the link, enter credentials on a fake landing page, the device they were on and drill down further to see more specific data. today, i'm looking for $500,000. for 30% of phishtrain because of our technical edge over our competition, our foothold on the global marketplace and our high profile partners and clients. thank you. >> congratulations. good job on that pitch. >> thank you. >> let me give these to you two. i need two numbers. one, what do you think of the product, and two, what do you think of the pitch. i love this. it's almost like a secret shopper but for cybersecurity. >> exactly. >> i think it's a really neat idea. let's see what our panel thinks. >> thank you. >> brad, let's start with you. >> all right. >> are you drawing a painting over there? >> i'm giving more specification. so i thought the product's really interesting. we see this as a really big need. we're spending a lot more time focused on cybersecurity. and i think it's an elegant approach to how you educate people. in terms of your pitch, i thought it was a nine, which is the highest one i've given. i thought you were engaging, you made eye contact and you were clear in what you needed. so i thought it was a great job overall. >> brad's first nine. good job. tanya? >> i did an eight and a eight. i thought the pitch was really strong. you educated on the problem that businesses could experience. i would have loved for you to pepper in some examples of just how clickble these phishing e-mails are because that would get my paranoia up and the product just sounds like it's really needed. i feel there was a lot of talk around phishing a while ago and perhaps people have gotten a little lax. it really opens up the opportunity for businesses to get harmed. it seems like it's a great time for this. >> if you're a small business owner, too, what seems neat is the ease of it. you just send this out to your employees and you quickly see who fell for it or not. it's almost like the secret shopper. congratulations on everything. good luck with your company. we appreciate you coming on the program. >> thanks a lot. >> and thank you, guys, of course for your advice and feedback. >> you're welcome. if any of you out there have a product or service and you want feedback just like you saw from our elevator pitch panel on your chances of getting interested investors, just send us an e-mail. the e-mail is yourbusiness@msnbc.com. in that e-mail, please include a short summary of what your company does, how much money you're trying to raise, and what you intend to do with that money. we look forward to reading all about your companies and seeing some of you here in the elevator. managing your cash should be one of your top priorities as a small business owner. that includes ensuring you get paid on time. unfortunately, your clients may not share your same sense of urgency. we've invited greg waldorf to come take to us today. he's the ceo of invoice to go, a mobile app that makes it easy for small business even owners to track work and get paid. so good to see you, greg. >> good to see you. >> i have heard stories of companies sending invoices to big companies and filling out one small part of the form wrong and not getting paid for months because the invoice gets lost in the shuffle. >> it's pretty typical. small businesses have so many cash flow issues. that's why getting a professional invoice to their customers quickly is so important. the first part is doing it digitally. not using paper and pen, not just using a microsoft word template. that's what our customers love so much. >> that's what you're saying. make it professional. make sure you have all the fields that you need. make sure it looks good. so when someone on the other side gets it, they understand this is an official document. >> we say itemize, itemize, itemize. make sure there's nothing your customer won't be able to understand, so as soon as they receive it, they can get on with paying you. >> that's so true. one question and it gets put in the to-do list in your client's office and that to do-list may not get to for months. whereas if they understand the bill, they pay it, it's done. >> and if they can receive it electronically that's one less thing for them to do. they would rather receive it in their e-mail than in the mail. >> like we like all of our bills now. let's talk about keeping the terms simple. before you even send out that invoice. this gets to your point about making sure they understand it. >> our customers really need to speak to the person who's going to be paying them before they do the work about what the expectations are about being paid. we're really surprised how many people don't have that conversation. if you have a digital invoice, you're able to reconfirm what you've already agreed to. >> got it. again, if you talk about it before and they're simple, everyone understands it, they get the bill, they pay it, they don't have to put it on the, okay, i have to call this person and figure out what this bill is. >> exactly. >> and the next one, let's send things immediately before people forget about it. >> the hardest thing for a lot of small businesses is to do their invoicing promptly. what they need to do is right when the work is done, think about all the work that they've completed and put it onto the invoice. instead of doing it on sunday night one or two weeks later where not only is it late, but you've forgotten a lot of the work that you did. >> right, right, exactly. again, if you're worried about cash flow, get it out there so someone can pay you back. now, you've talked about digital a bunch already in this conversation. what's wrong with sending someone something in the mail? >> one of the biggest things, if you send it in the mail, they don't get it as quickly. another thing, you can see when the person received the invoice. we have a new feature in invoice to go right now that lets you see when your customer has opened the e-mail and viewed your invoice. >> that way you also know when to follow up with them. >> exactly. >> i know you've looked at it, let me give you x amount of time. how much time do you suggest? that people give before you call? >> it depends on the industry. whatever the amount of time that's stated on the invoice, you need to promptly follow up if you haven't yet received payment. using an app like invoice to go allows you to automate those reminders. once the invoice is late, the customer, if you choose will automatically receive a reminder. >> and then finally, we've already talked about itemizing, but this is also client dependent. that should just be something you talk about in the beginning, how much detail do you want? >> yes. it's really important to talk about detail. one example would be photographs. a lot of customers want to see an image of the work that's been completed. it gives them confidence that the work was done properly. everyone has a smartphone today. with an app and being able to take pictures, you can send through images of the work that's been completed. >> is there ever too much information you can give on this invoice? >> i don't think there's too much information you can give. >> got it. if you want more information here go onto the next page. >> it just saves the small business owner from having to respond to more questions. >> thank you for stopping by. we appreciate it. >> thank you for having me. when we come back, more on how utilizing metrics can help you deal with investors and employees. and how to find a consultant that is going to help, not hurt your business. will your business be ready when growth presents itself? our new cocktail bitters were doing well, but after one tradeshow, we took off. all i could think about was our deadlines racing towards us. a loan would take too long. we needed money, now. my amex card helped me buy the ingredients to fill the orders. opportunities don't wait around, so you have to be ready for them. find out how american express cards and services can help prepare you for growth at open.com. i need to hire a consultant and i've seen the damage that the wrong consultant can do to a company. how do i know which consultant is right for me? >> you need to hire a consultant just like you would hire an employee. do they have shared values? are they passionate about the end result you're looking for? really focus on them as if they were entering your company as an employee or even part of your family. they need to be what you want for the long-term and have share goals and outcomes. >> we now have the top two tips you need to know to help your small business grow. tonya and brad with back with us. brad, lets start with you. you recently sold the company or one of the companies you're investing in was sold and you're helping run a few others. what's one thing that makes them successful? >> i think the key is to focus on metrics and reporting and do that on a consistent basis. it helps you communicate internally with your team. everybody knows what the goals and objectives are on a weekly, monthly and annual basis. and it also helps you communicate with with your investors who you might need to go back to for more capital but we think that that reporting is the most important thing to understand the vital seens of your business and it's a really good level of discipline to keep everybody on the same page. >> so the key is though figuring out what metrics you want to follow and how often. >> absolutely. >> these are the ones you look at daily. these are the ones you look at monthly. >> and look at your key functional areas. personnel, marketing, finance, product, technology. if you focus on each of the key areas, and the objectives of each of those key areas, it keeps everybody aligned, everybody on the same page. and most importantly, it helps you identify things that are going really well but it also can identify problems early on so you can change the way the company is acting. we think it's the most important thing and the difference between great entrepreneurs and the ones that are going to struggle through their businesses. >> what's also interesting about metrics, you put together a list. these are the ones we're going to follow and then people that may be owners of one metric or another always have a reason why it's not working. we didn't put enough resources against us or we did this or did that but at least it gives you a way to talk about it. you find this happens in your company? >> 100%. it also sets the expectations about what you're tracking as a manager and what a team lead ought to be tracking and maybe it's the wrong metric but if you haven't stated that up front you might be thinking success is one thing and they might be thinking another. >> and you see the tension a lot between product technology and sales and marketing. >> yep. >> sales and marketing is always arguing they're not doing as well because the product isn't where it should be or they haven't released the features on time. whereas, you know, that's sometimes not the case. sometimes it's just that sales and marketing is not properly doing their own thing. >> the metrics at least give you a jumping off point. >> correct. >> an objective jumping off point to have these conversations. >> it gives you a time frame in which to see change. >> right. >> we always want to make forward progress. if you have a metric that's not performing and you mack a decision in your management team to change what you're doing, you can look at how that impacts the metric over each week and see how you can improve the business. >> all right. tanya, you're up. >> my top tip is to tackle the hardest thing on your list first. i don't know about you but i love making lists. it brings everything out of my mind and on to a page and i can list out 25 things and get 23 done and not handle the critical two. my top tip is to start with the one you have been avoiding. the one that maybe people aren't pressuring you to do but they're critical for your business and once you have overcome that at the start of your week or at the start of your day, you've already had a when. you're not afraid of anything and nothing is looming over you and you can knock everything else out with a clean conscience and great organized list. >> that's the thing. if you have something on that to do list you know you don't watch the to do, no matter what else you're doing, it's sitting right here in your gut. >> and it swells in proportion to the amount of time you sit on it as well. recently there was one thing i knew hi to do. i was making it bigger and bigger. when i finally tackled it, it took me 15 minutes. i had to concentrate and push through it but everything after that is easy. >> by the way, i love making lists also. do you like it too? >> i actually use something called follow up.cc. i manage everything in my e-mail inbox, so i forward things when i want to deal with it. >> that's interesting. >> when i want to deal with something rather than have a list i just use my inbox so it comes to me on the day i want to deal with it. >> i'm you, tonya. there is such satisfaction in a list. >> physical list. >> great. so good to see you both. thank you so much. this week's your biz selfie comes from tim willett that runs kayaking ohio. this family run business rents out kayaks and helps take trips on the local sandusky river. that looks like fun. what a good company. now pick up your cell phone and take a selfie of you and your business. send it to us with your name, the name of your company and location to your business@msnbc.com or tweet it to @msnbc your biz. use the #your biz selfie and we're excited to feature you here on the show. thank you so much for joining us. we'd love to hear from you. if you have any questions or comments about today's show e-mail us at your business@msnbc.com. also please visit our website. it's open forum.com/your business. we've put up all the segments from today's show plus a whole lot more. don't forget to connect with us on all of our digital and social media platforms, too. we look forward to seeing you next week. until then, i'm jj ramberg. remember, we make your business our business. brought to you by american express open. visit openforum.com, for ideas to help you grow your business. but after one tradeshow, we took off. all i could think about was our deadlines racing towards us. a loan would take too long. we needed money, now. my amex card helped me buy the ingredients to fill the orders. opportunities don't wait around, so you have to be ready for them. find out how american express cards and services can help prepare you for growth at open.com. there's a couple of different ways to take a snapshot of where we are in terms of the news at large. from the wisest lens in terms of our country and the world right now, there are fraud things going on in the news. this week after north korea launched its nuclear, the u.s. military flew nuclear-capable b1 bombers over the korean peninsula as a show of force. we're in the habit of doing this whenever north korea gets up on its hind legs and tests dangerous weapons. but right now flying the nuclear weapon-capable bombers is a sign that the o

Transcripts For MSNBCW Your Business 20170521

on whatever comes next. for those who find new ways to grow their business, american express open proudly presents "your business" on msnbc. hi, everyone. i'm j.j. ramberg. welcome to "your business," the show dedicated to helping your growing business. you may be wondering why i'm holding a bag of marshmallows. today, we kick off with a store tla started with a marshmallow like this one. now, it's a multimillion dollar company. this is a story about following your dreams, following your instinct and taking everything you have learned throughout your life to build a business and have a lot of fun along the way. ♪ >> all my friends were telling me, have you lost your mind? you have to be crazy. >> there was a huge learning curve in the beginning. >> beaver and kim raymond knew nothing about the toy industry when they started their company in 2005. >> it didn't start as a planned business. >> they were holding down big jobs in the fashion industry and planning an upcoming birthday party. >> 15 boys coming to spend the weekend. i realized friday night that i forgoto get par favors. >> beaver sat down and turned 15 pieces of pvc pipe into tiny, homemade marshmallow shooting blowgun party favors. >> it was a huge hit with the kids. >> that didn't surprise kim as much as what happened with the marshmallow blowers after the party ended. >> when the parents came to pick them up, they were having as much fun as the kids. >> this got them excited enough to dream big and get help to develop lots of new shooter designs. ♪ >> we kind of took a look at what the energy and excitement that was created and we thought, this could be something. >> that's what started the company. >> it was just a hunch, but with beaver's background in manufacturing and kim's knowledge of marketing, they started up a business around the shooters. they named it the marshmallow fun company and started showing their products to toy sellers. >> somehow or another, they said can you make some for us? we'll buy a container. i said, who is that and what is a container? >> once we realized we needed to produce 10,800 marshmallow shooters, we made the call, pulled the trigger and started the production. >> in their rush to fill that order, they insisted on using the highest quality plastic and the trendiest colors, two things they took from the fashion industry experience. veteran toy makers later told them, that was a mistake. >> they said, number one, the colors are wrong. there's too much quality into it for a toy. i thought to myself, i have 10,800 piecesn the water coming to me. i am totally screwed. >> despite his concerns, when the shipments arrived, beaver's fashion instincts opened up the market for retailers outside the toy world. >> we got the attention of people like nordstroms, neiman marcus. it was coming from everywhere. it was based on a cool product with a lot of quality. >> they followed up with other fashion industry marketing practices like asking retailers what new styles they wanted for next year. questions that toy sellers don't usually get asked. >> we said what do you like? what are your color themes. they look at us like we are crazy. >> crazy because they don't tweak successful products. >> we were behaving the way we knew. >> what beaver and kim knew is new styles bring buyers back for more. >> we do cheetah prints, peace signs, camo, classic, whatever the customer is looking for. it blew out at retail. >> this led them to another fashion business tactic, the private label or special editions branded in names of retailers like nordstrom, knee mus marcus and others. >> it's a limited amoun you are doing for a special cusmer. because is only in one place or one brand that they could charge a little bit more, which helps my margin as well. >> thanks to private labeling, they ended up in clothing stores, movie tie ins and food stores. >> we kill it at the candy show. we are the only toy at the candy show and we get a tremendous amount of attention. >> one of the accounts we met at toy fair several years ago was all the executives from drugstore.com. we asked them if we could show them the line. they said thank you so much, but we are not a toy company, we are health, beauty and pharmaceutical. i said you can still have fun. three days later, we got a call and they wanted to put it on their website. that year, they sold over 100,000 marshmallow shooters and they said, we want a gold plated marshmallow shooter for our corporate office. >> why were they celebrating? >> we outsold viagra that year. if you have ever posted or looked at a picture on instagram, you can thank kevin and mike. if you can believe it was only 6 1/2 years ago they launched the app, they have 700 million users. willie geist has the story. >> reporter: instagram was a start-up idea whose beauty was in its simplicity. take a single photograph of where you are, what you are doing, share it in realtime with the people in your life and give them an easy button to push to show they like it. that simple idea is now a global community. >> let's talk about 700 million monthly users. you set out to do this 6 1/2 years ago. did you ever dream being where you are today back then? >> no. i think we started, you know, know thag we wanted to bring this out to the world, but this is kind of beyond our wildest dreams when getting started. >> i remember looking at mike and being like, i think we are on to something. meanwhile, he's stressing out keeping the servers up. he's like, maybe. >> reporter: 33-year-old kevin and mike met studying at stanford university. kevin worked at a company later known as twitter. he shared a desk with current twitter ceo, jack dorsey. make came from his native brazil. do you remember mike, meeting kevin at stanford? >> i remember talking about the company that became twitter and we talked about it. >> we barely knew each other in college. it was when i left my job at a small start up. i wanted to start something independently. i met mike in a coffee shop. she was working on -- hacking on a project. i was like cool, he's hacking on a project, seems smart. >> while in college, kevin turned down an offer from a young entrepreneur to work at a company he was building. that entrepreneur was mark zuckerberg. the company was faceok >> i remember meeting o of my mentors and i was like hey, should i do this facebook thing. the person said, ahh, it's a fad. >> reporter: in 2010, four years after graduating stanford, they got together to start their own company. their first idea, a company called bourbon, didn't work out. they took what they learned from the experience and in the fall of 2010, launched instagram. in less than three months, 1 million people joined the open network. >> we stripped away everything and said, if we want to make this particular experience of taking a photo, sharing it and making that quick, how do we make that incredible. >> reporter: as you sat there, at your laptops, watching this thing explode, at some point did it feel like this is getting away from us? we are not ready for this much success? >> we are crossing 1 million. 999,999. it flipped to 1 million. we were just like, did we just do that? like, did it happen? who is that person. who are these people? i think we looked up who that was. it was getting away from us. in some ways, it is. your job is catch up with it. >> reporter: 18 months later, instagram had 30 million use zers. among them, big names who fell in love withhe platform. as the company was growing, before you sold it to cebook, who were the craziest celebrities who joined instagram. you are like, oh, my god, that person is using it. >> the first was snoop dogg. >> snoop was the first? >> he really joined early around, you know, i think -- >> it matters. he makes it cool. stamp of approval and people flow in behind him. >> a team of eight or nine at the time and snoop dogg joins. you get a message his people want to come to the office. snoop's people -- i don't have people. do you have people? i went to the vatican to on board the pope. you realize they are so influential in the world and are using our product to get our message out in the world. that's really special. >> reporter: that's got to be a moment when the pope signs up for instagram and help him. >> he touched the sign-up button. i was like i really hope this works. >> reporter: mark zuckerberg took note it of what was happening. he called kevin with a second chance to come to facebook. with less than two years into its life, instagram was sold to facebook in april of 2012 for $1 billion. kevin and mike stayed on to run instagram under facebook. even with their latest updates, stories and live, the instagram founders say they are just getting started on what's possible within instagram with designs on becoming a multibillion user platform. does virtual reality fit in? >> if we could use a teleporter for a wedding or missing vacation and allow y to experience that, that is something that is on the horizon for instagram. >> reporter: they are moving fast into the future. they pause briefly to reflect on what they have built in less than seven years. >> every day, i wake up and work on the most amazing thing in the world. get to change 700 million people's lives every single month. that's crazy. i love working with this guy. it's just -- it's a dream. it's awesome. some of the biggest names in business are sharing their words of wisdom on twitter. but, which ones are worth our attention? entrepreneur.com gives five inspiring accounts we should follow. kevin rose is the co-founder of four start ups and at google ventures. with over 1.74 million followers, he shares his favorite new products and services on twitter and engages heavily with subscribers. two, brur investor steve case shares interesting news articles and motivational quotes to help people grow their businesses. three, randy zuckerberg may have a famous brother, but shares business lessons with followers and introduces them to inspiring entrepreneurs. four, marketing gu rye, guy kawasaki tweets his take on current events, success stories to people in the industry. five, injure ard adams, the co-founder of elite daily and mentor. he posts daily motivation to inspire when you are in a rut. bad leaders can ruin everything. when i think about my own career, the places where i felt most successful and the companies were most successful, a lot had to do with who was leading the team on all levels. lolly is the ceo of the leadership executive coaching firm. she is author of the book, "the leadership gap." what gets between you and your greatness. >> great to be here, j.j. >> this is everything. leadership is everything. so, i want to get down to your points about how you become a good leader. one is lead by example. i think so many people forget. >> absolutely. what does it mean to lead by example? a leader, if they want to be respected, if they want to be trusted, if they want their clients and their employees to be loyal, a leader needs to lead by example chltd they have to trust their employees to do their job well. they have to respect their employees in order to respect them for their talent and their skills. don't micromanage them. allow them to do their job. be loyal. if they mess up, have their back. a leader needs to lead by example in order to be trusted, respected and have loyalty given to them. >> i think they need to write down, here is how i want my managers to lead their team. you can see it in other people, often. think, okay, am i really doing that myself? >> absolutely. it has to start with the leader themselves. >> let's move to the next one. share information. there's been a big change in the way business is being done over the past many years. there used to be the management team where they know everything, don't tell ,anyone people find out there's a cnge when they read it in the newspaper. there's much more openness in companies. >> communicate, communicate, communicate. communicate the bad, communicate the good. people know when you are withholding information. people know something is going on in the company that isn't being said. when that happens, people create stories within their own mind, right? they make up stories, this is happening and that's happening. usually, the stories they are making up is more, i think is worse than what the reality is. so, it creates suspicious within a company. a leader must communicate at all times about what is really happening in the company. >> how do you deal with it when there are things for a variety of reasons? partnership deals, whatever, and you cannot communicate it. employees know something is going on. itis a fine line to walk. >> absolutely. that's important what you are saying. it's a smart question. what do you communicate and what do you not communicate? if it affects your employees, they need to know. if it doesn't directly affect them, they don't need to know right away. they need to know and understand what is happening. >> knowing how to delegate. we started talking about this earlier. it can't be just all about you. your company won't grow and no one is going to want to work with you. >> a leader, they think they know it all. they have to do it all. when a leader has that kind of mind set, they become a leader that is a micromanager. they don't allow people to be who they need to be. i hired you for a reason. then do your job. create and do your talent and your skill. when a leader doesn't delegate, it sends a very bad message. >> yeah. >> it's very, very important that a leader be very good at delegating and putting the right people to the right job, to do it the right way. >> when you see them doing something in a different way than you would do yourself, stop yourself. right? if they don't then get the results, then maybe that person is in the wrong job or needs to be trained. in that beginning time, stop yourself and see if they can do it. >> right. watch, look and listen. allow them and challenge them. challenge them to step up to the plate. if they are not doing it exactly like you like it, challenge them. don't tell them how to d it, show them. that's the difference between an effective leader and great leader. >> be a quick decision maker. you never want to be the roadblock in your company, ever. >> absolutely, j.j. that is so important. you need to be the kind of leader that knows when to make decisions, but make it right away. if you are sitting on a decision, people see you as a leader that is inactive, not really a leader. a leader takes a actions. >> a leader makes quick decisions. you need to be a quick decision maker. >> it's frustrating. as a leader, you want people to make decisions fast. you don't want to find out something didn't get done because it's stuck in a committee. lead by example. you have to get it done. finally, when you talk about celebrating diversity, i know you mean bring people in that are diverse, but what doo you mean by celebrate? >> there's unique individuals. you and i are very different. we are different for different reasons. we have different stories, different backgrounds. it's important to celebrate diversity. we each bring something unique to what we do. if we all want to be cookie cutters, you have a company that is mediocre. it's important to celebrate the uniqueness of each individual to see what they can bring to the company. >> thank you so much, lolly, we brees appreciate all this. when we come back -- looking for a place to hang out with rover? our elevator pitch and rover have an app for that. will your business be ready when growth presents itself? american express open cards can help you take on a new job, or fill a big order or expand your office and take on whatever comes next. find out how american express cards and services can help prepare you for growth at open.com. as a minority female recovering sorpt executive, what would you recommend for those of us in the financial services industry in the startup world to succeed a n a male dominated industry. >> as a minority in a male dominated industry, i don't have to tell you to work hard or long, and my opinion? u already learned those lessons in the process of getting to where you've gotten. my tip is to remember that it's a marathon and not a sprint. you know how to work hard. now work smart. when folks are taking business meetings on the golf course or people are rubbing elbows with potential clients, it feels like fun, but the reality is those are the deep sort of connections that will get you to the next level. what got you where you are now is not necessarily what's going to get you to the next stage. figure out how to work smart. you already know how to work hard. i'm go founder of slobbr. dogs are family. that means we want to include them in every aspect of our life. going out to dinner, traveling, and so much more, but try planning a day out with your dog or even a vacation. it's a headache. enter slobbr. it's an app that allows you to live life with your dog. there's a map that shows you dog friendly places around you. when users check in, we donate kibl to a local shelter. you as investors know the pet industry is a $70 billion industry. one referred to as recession proof. slobbr is looking to focus on advertising and programs like with lyft. ask yourself this. do you slobbr. >> i hope your answer is no, but how much money are you looking for? >> $200,000 for 5%. i need two numbers from you. >> two numbers. from one to ten, what do you think of the product and what do you think of the pitch? >> well, i gave the product nine, and your presentation was fantastic. and i gave ten for the dog. just the cutest thing. i love this idea. i'm a dogma ma myself. and i have had that challenge of trying to figure out how we can get around. i love this idea and i love that it has a social aspect to it as well. >> i gave an eight and eight. that's a high end on my scale. i thought the product's interesting. a couple of the guys in our office just got dogs. watching them try to scamable for services or plan or dog sit or pick up the dog and take them for a walk and where they can take them takes a lot of time which is impacting productivity. and the pitch? i thought you delivered a well spoken clear concise, knew what points to hit on and delivered it in a short period of time. great job. >> one last question. can you tell us anything about traction? >> when you invest, we will happily the tell you about traction. >> all right. you got them interested without telling them. i think that's usually one of the things you usually need to talk about. thank you both. now, if any of you out there want to come on your business and pitch your company just like you saw john do, the best way to do that is end us a video of you doing your one minute elevator pitch. send it to us at yourbusiness@msnbc.com. include a short summary of what your company does, how much money you're trying to raise, what you intend to do with the funds. we look forward to looking at your pitches and seeing some of you on the show. here with the top tip to help your business grow is audi williams. she's the fonder and owner of d.c. home buzz. good to see you. >> thank you for having me. >> you see things from the investor side, and you've built two successful companies. what's something you learned as you started your comnies and now own these sizable companys? >> what i have learned is that being an entrepreneur is a lonely place, and one of the things that has been really helpful is finding a tribe. the tip that i have for other entrepreneurs is to try to find a tribe of people who understand your language, who you can commiserate with who can be candid and supportive. not a network. you're not trying to gain their business. you're trying to have them be a peer support group. >> that's a good idea. sometimes you need someone to vent to or you need someone to ask advice of that isn't totally business. it's not like how do i market? >> but i was up at 4:00 in the morning. >> being an entrepreneur is a 24-hour thing. you're also a family member, a mother, a sister, wife. so trying to find people who understand that you don't just go to work from 9:00 until 5:00. >> and who you can be honest with which you can't always do when you're doing business. >> exactly. thank you. and brad harrison, i think something that happens, we've all done it. we have a product. we think it's a fabulous idea. and we put it out there, and it fails. >> and the reason why is because you did not get customer feedback before you launched your product. and i thi that's the most important thing. go out there and actually get feedback from your real customers before you launch your final product. whether you do that in a focus group, whether you do that in a survey. it is the most critical thing. i think the more advanced companies use things like their net promoter score and other things to gauge how customers view their product. but i've always seen companies that have made product changes not gotten customer feedback, launched the product, and had a catastrophic response from their customers, because they're missing key features, or they have done something wrong. so the best way to avoid that is ask the people who are going to use the product before you launch the product. >> by the way, i believe customers like being involved in today's day and age. no matter how big or small your company is, if you have dropped a relationship with your customers, i think they like giving feedback. >> with wbigger companies, you can use kpanls like twitter and they're monitoring those channels. i put something out the other day. i put out something that was there's an app called docoin ba. i put out something that the app was crashing. when five seconds i got a response from the lead investor, and the product manager an they monday they fixed the product. >> that's the second thing. monitor what people are saying to you. it can be helpful. thank yoso much. >> thanks. this week's your business selfie comes from the owner of last call 4 cup cakes. the name gives you a little bit of an idea as to why her cup cakes are for adults only. they are infused with premium spirits and liquors. send us your selfie. we love seeing pictures from your companies from around the country. include your name, the name of your business, your location, and use the hash tag yourbusinessselfie. >> we love hearing from you. if you have any questions or want to say hi, e-mail us. also go to our website. we posted all of the segments from today's show plus a lot more for you. and don't forget to connect with us on our digital and social media platforms as well. we so look toward forward to seu next time. remember, we make your business our business. will your business be ready when growth presents itself? american express open cards can help you take on a new job, or fill a big order or expand your office and taken whatever c next. find out how american express cas and seices can help prepare you for growth at open.com. good morning, and welcome to politicsnation. president trump is in saudi arabia this morning, and in the next hour he's expected to deliver a speech aimed at muslims around the world. he's expected to urge muslim unity in the fight against terrorism. msnbc will carry that speech live. trump arrived yesterday as he began his f

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