Value Investing and Entrepreneurship Blog

I’ve been meaning to write this for some time but didn’t get around to it. We received our new, shiny metal business cards several weeks ago. And we absolutely love them. They are made of brushed stainless steel with chemically etched text and etched through drill holes.

The hours we spent designing and redesigning were totally worth it. The only drawback with the cards is that they are heavy to carry around especially if you plan on carrying, say 50 cards. But I love the feel. It’s different from paper or plastic cards. Feels sturdy and hopefully stands out among other business cards. And, don’t tell anyone but if you stick this into an ATM, it will spit out money. I swear, cross my heart.

If you love them as much as we do, please vote us up at faveup.com.

After laboring 18-hour days for two months in a row to get your next Google-killer application out the door, nothing is more depressing than watching your site traffic continue to hover around the 8-visitor-per-day line on the day you launch your product. And worse, your mom, your dad, your little brother and sister and your best friend make up the first five visitors. You scratch your head and wonder “What the hell is wrong with everyone? This is bigger than iPhone. I should be worrying about whether my server will hold up with all the traffic I’ll be getting. F#$@!”

It hurts. Believe me, I know. Have you heard of our product IncBaby? Exactly.

Instead of crying over spilled milk, I’ve decided to get my act together and figure out how to market properly. If you are a geek like me, you’d think the word “marketing” is as evil as Microsoft. It reminds us of greed, power and ruthlessness that lead to the corrupt corporate empires. But the sad truth is, to get your product into the hands of your customers, you have to first market your organic, wholesome product to the world.

Marketing does not yield effects overnight. It is a long term commitment. You need to think about marketing every day. Someone once said, “Running a startup is 50% coding and 50% marketing.” Because it takes time to build a following, it is important that you begin marketing way before you plan to launch your product. This way by the time you launch you already have a steady following, thus increasing your chance of a successful launch. Because blogging is the cheapest and one of the most effective form of marketing, this is where I’ll be focusing my discussion.

Before you cringe, marketing your site is really as simple as the five steps listed below. Just add a pinch of creativity and a whole lot of persistence and you will do fine. Without further ado, here are the things I’ve found effective via trial and error:

Step 1: Catchy Title Like This One

This is why you are reading this. The most important thing about blogging to promote your site is to come up with a catchy title for your article. When you do a search in Google for a topic, you first see the big bold blue links. If your article title doesn’t stand out among the ten titles listed on the page, you will lose quite a bit of potential traffic. No matter where your article is going to appear, the title is always the first line that people read. So, make sure your title grabs the attention of the reader within the first few seconds. Erica Douglass, a millionaire entrepreneur, found out that positive headlines do better than negative headlines. Chip and Dan, of the Made to Stick bestseller fame, came up with a simple formula known as SUCCESS to come up with ideas that stick. Some of them can be applied to headlines. Write unexpected headlines. “Google Search Is No Longer The Best” is more likely to garner attention than “Better Search Results with XYZSearch”. Be specific. “Get a Raise By Asking” is not as interesting as “Get a 20% Raise In Three Minutes”.

Step 2: Content, content, content.

A great title must be paired with great content. Great content is content that is useful to your readers. Tell a story. A story is easy to remember and makes good entertainment. Be controversial. A little bit of controversy as long as you can back up your opinions can pique curiosity and challenge the conventional wisdom. Be personal. Don’t be afraid to show who you are. To paraphrase Steve Pavlina, your life experience is unique. So that makes your content unique when you tell a personal story. Create a list. Most popular articles are lists that are insightful. In fact, marketing guru, Seth Godin, lists this as the first item on his list of suggestions to grow your traffic. A list allows the casual reader to quickly scan an article and get the message right away.

Step 3: Make Your Site Viralable.

Now that you have created something of value for the world, it’s time to make sure your site is, what I’d call, “viralable”. A site that is viralable is a site that is capable of being spread easily. The best way to achieve viralability is to add something like an Add / Share This button. An Add / Share This button allows a user to submit your article to popular content aggregators such as Digg, Reddit, Delicious, and StumbleUpon. These aggregators could drive thousands of visitors to your site.

Step 4: Optimize for Search Engine.

A great website is nothing but a great waste if no one could find it. There are a lot of Search Engine Optimization (SEO) experts out there who charge hundreds to optimize your site for search engines. You don’t need them. If they are so good at SEO, they won’t need to sell you their services. They can get rich selling ads. Just do the basics and you’ll do fine. Use the free Website Grader to guide you. Focus on writing great content for your visitors and the rest will follow. One more word on content… Don’t touch on every topic under the sun. Try to focus on a niche. Be an expert on a narrow topic. For example, if you like to talk about safe, organic cosmetics, then talk about that and nothing more. As you write more, you are building credibility that supports your expertise. You may not be the first in the search results for “cosmetics”, but you are likely going to be the first in “safe cosmetics”.

Step 5: Tell the world.

Great! You have made all the preparations for the finale. It is time to announce to the world the birth of your shiny new website. Here are a few ways to make your entrance:

a) Submit your best articles to related blog carnivals.

Blog carnivals are basically quality link exchanges. The host of a blog carnival gets to choose the best articles from all submissions and list them on his website. Most often the host website has decent traffic, so you get a fair share of the traffic. You can also volunteer to host a carnival as well. Blog carnivals work well for websites just starting out. I’ve tried them with wonderful results.

b) Comment on popular blogs.

Erica Douglass suggested commenting on popular blogs. This is also known as networking in the blogosphere. When you comment on someone’s blog, you can link back to related articles on your blog. You get some decent traffic from this. I’ve tried this with mixed results. So I wouldn’t place too much emphasis on this. But your mileage may vary.

c) Submit guest posts to popular blogs.

Contributing your articles to popular blogs for free is a great way to promote your blog. This is one of my favorite. Remember to include a link back to your blog in the footer of your guest post. Make sure you have some content other than your guest post on your blog first. Otherwise, there’s nothing else for your visitors to come back for.

d) Linkbaiting.

I picked this up from reading Problogger Darren Rowse’s 20 Linkbaiting Techniques. Some of the techniques recommended include writing a controversial piece that challenges the point made by the blogger. I’ve tried this with 150 Stocks - The Secret to Proper Diversification? and found it to be quite effective.

e) Participate in publicity stunts.

Another linkbaiting technique involves hosting a contest. HubSpot recently announced a 50k viral marketing contest offering $100 for published articles and $5k if the article made the Digg front page. To tell you the truth, I submitted a trimmed down version of this article to the HubSpot contest but didn’t get selected. I didn’t care too much about the prize money although winning the 5k wouldn’t be bad at all. I was more interested in the potential traffic I might get from being published on their blog. Anyway, I figured, what the hell, I’m going to write this anyway so I can share my worldly wisdom with the world. Hmm… Now I think about kicking myself when I imagine how I’d miss winning the $5k if this article did make it to Digg front page.

Finally, once you have achieved stardom, never forget your readers. They got you here. Continue to write great articles for your readers to keep them engaged and build loyalty.

By now, you might be thinking, “Gee, all this kinda make sense. I wonder how his blog is doing relative to the sites he mentioned?” Well, I’d tell you “It’s literally off the chart”. But a picture paints a thousand words. So, here’s a snapshot of this site’s traffic as of this writing in relation to sites mentioned above. Enjoy.

How do you market your website?

The first question most often asked when building a startup is “What will the startup do?”. My scientific guess is the first answer that comes to 97.8319672% of the entrepreneurial population relates to social networking. Don’t believe me? Head over to CrunchBase companies advanced search and search for “social networking”. Note the number of pages at the bottom of the search results. Now try searching for “waste”.

People are like lemmings. We tend to follow the hottest trends. How many of you bought the gladiator style sandals after watching Sex and The City? How many of you bought the new iPhone 3G? Like the gladiator sandals and the iPhone, social networking is the hottest trend in the startup world thanks to Facebook, MySpace, YourSpace, MyMa’sSpace and what have you. Starting a social networking site when social networking was still at its infancy was a great idea when Facebook and MySpace took on the challenge. The problem with starting another one now is you have so much competition. This leads to my definition of a startup idea.

What Is a Startup Idea?

Everyone can think of some pretty good ideas. But not all good ideas can be monetized. A startup idea is an idea that creates value that people want. I know, the definition is boring and simple. There’s nothing cool or hot about it. But the fact is, a startup idea doesn’t necessarily have to be cool, novel or even (gasp!) trendy. A social networking site for startups might be cool. But you will need tons of money to burn through to achieve critical mass and you will face tons of competition. A car with no wheels might be novel. But you are venturing into uncharted territory where no market exists. It’s a tremendous uphill battle. But a website that tells you where to buy the cheapest organic, non-fat milk in your area might be one that busy moms will pay for.

Because 99.99999% of entrepreneurs start a startup to make money, it is only logical to think about how you can monetize your idea from the beginning. There are two ways to make boatloads of money starting a startup. The traditional way is to aim for profitability and stay profitable for as long as you can. The second is to design an exit strategy that will persuade investors to write you a check the size of a mega-lotto lottery and retire on the white sands of the Maldives. Many times the first method leads to the second. If you think about it, investors tend to shy away from companies that don’t generate revenues. It makes sense because revenue is the best proof that there is demand for your product. Yes, YouTube did it and made billions. Akimbo didn’t. For every YouTube, there are many more Akimbos we have never heard of. Many entrepreneurs make the fatal mistake of ignoring the monetization of their ideas until it is too late.

Coming Up with Ideas

So, now we know that a good startup idea is also an idea that can be monetized, how do we come up with such an idea? There are many ways to come up with ideas. I have found the following methods most effective from my own experience.

Sit and Think

I find it hard to come up with ideas while talking to people. When you are engaged in a conversation, you are focused on responding to your partner. Your mind is not allowed to wander too far. If you do, your partner may think you are nuts. So, I think it is best to find some alone time to generate ideas. Let your mind wander freely. I will talk more about sources of ideas in a bit. Once you have come up with an idea, it’s time to engage your partner so you can talk about it. Present your case and let your partner tear it into shreds. Then both you and your partner should go back and refine and ask your partner out for coffee so you can both go at it again. Eventually, you will find one that both of you are sold on.

Take a Shower

No, not the kind you have in mind. Taking a shower is relaxing. It is one of the most private times you have to yourself throughout the day. No one will interrupt you with a phone call or a conversation. You have the opportunity to day dream. This is where I came up with most of my ideas. You let your mind wander freely. You begin to imagine some of the most outrageous what-if questions to solve problems that bother you the most. And then the light bulb in your head came on. In your excitement, you ran out of the shower looking for your partner to tell him about your next killer startup idea only to find that you forgot your towel. Embarrassing yet enlightening. But it’s true. If you have an entrepreneur’s block, go jump in the shower. It will do you and people around you wonders.

By Accident

In 1666, while meandering through a garden in Lincolnshire, Newton observed an apple falling from the tree to the ground. From this, he questioned whether the gravity could extend beyond the Earth to the Moon. Thus, universal gravitation was discovered. For us mere mortals, it’s unlikely we could discover something as profound as universal gravitation. But if we begin to ask questions that challenge existing boundaries of current solutions, we may well find ourselves an idea for a startup. Of course, by definition, an accident is an unforeseen incident. We can’t position ourselves in the path of an accident. Since this is not really a method and more of a happenstance, we can only prepare ourselves for it. The next time you observe something as mundane as having to remember to park your car on the other side of the street because there is a street sweep tomorrow, think about how you can help fix that problem.

Sources of ideas

After exploring the three methods of coming up with ideas, let’s explore where we can find sources of ideas.

Existing Annoyances

Men are the greatest adapters. We filter out minor annoyances and forget about them. In reality, there are hundreds of little annoyances that could make our lives a lot better had we had solutions for them. But since we don’t recognize them as annoyances to begin with, they become just another mundane incident in our daily lives. So, to seize the opportunities offered by these incidents, we need to constantly remind ourselves to focus on the little annoyances that aggravate us. Lower our threshold of tolerance and stop accepting things as they are. Demand a better solution. Post-it notes were discovered when Art Fry was frustrated that his bookmarks kept falling out of his hymnal in his church choir. So he took Spencer Silver’s low-stickiness glue and applied it to his bookmarks.

Reading

You can’t conceive ideas in areas of which you have no knowledge. For instance, I can’t even begin to imagine how synthetic blood can help speed recovery of injured athletes and save lives. Reading widens your sphere of knowledge and therefore your sources of ideas. People tend to have multiple interests. You may enjoy coding. But perhaps the euphoria you experienced from sipping a glass of 1995 Chateau Margaux last weekend turned you onto wines. To deepen your knowledge in your new-found passion, you began burying yourself in any book you can find about wine. Then it dawned on you that not many people understand great collectible wines. But thanks to your coding wizardry, you figured an algorithm that could predict the kind of wine a person would enjoy given his age, tastes, the music he listens to, the car he drives and even the hotels he chooses to stay in. (Don’t ask me how.) There are probably many people who are great programmers and many who are fine wine connoisseurs. But I bet you there are only a handful who are both.

Transfer a Working Idea to a Different Field

This last source of ideas is quite effective. It is, in fact, somewhat related to the aforementioned intersection of knowledge in different fields. You start by observing an idea that is working especially well in a field. You then begin asking questions such as “Could this also work with bookstores?” A good example here is perhaps Elance. I don’t know how the idea of Elance originated. eBay was founded in 1995. Four years later Elance was founded. If I were to come up with an idea like Elance, I would have noted how well eBay worked. And since I build websites, I would have wondered “Could this auction system also work for web development services?”

Most of the content here is a result of what I learned from reading Paul Graham’s insightful essays. If you would like to learn more about finding ideas for startups, I highly recommend Paul’s Ideas for Startups.

After discussing the tax implications and registration and maintenance costs that one needs to consider when choosing an ownership structure, we now explore the efforts needed to stay in compliance with regulations for an S Corp and an LLC.

Limited Liability Company (LLC)

Articles of Organization

Because an LLC is treated as a separate entity, forming an LLC also requires the filing of an Articles of Organization (or Certificates of Organization in some states). This is the equivalent of a corporation’s Articles of Incorporation. As mentioned in my previous post, preparing the Articles of Organization is a breeze compared to preparing the Articles of Incorporation because you simply need to fill out a one-page form. You will need to have answers for the following to fill out the form:

1. Name of LLC
2. Registered agent
3. Address of individual registered agent
4. How many members will be managing the LLC
5. Your name as organizer

Operating Agreement

Although an Operating Agreement is not required to form an LLC, it is highly recommended to protect your partners’ and your interests. Some of the basic information included in an Operating Ageement records members’ percentage of interests in the business, voting power and rights and responsibilities in day-to-day operations. This is also a good place to document who will be managing the LLC. Depending on your agreement with your partners, you may decide to divvy up profits in a manner disproportionate to ownership interests. Note such important decisions here as well to avoid future disputes. There are some very difficult questions that you need to address because these questions are typically not things you would consider especially when everything seems to be perfect when you are just forming an LLC. Examples of these questions are “What happens when a member decides to leave the LLC?”, “Will the member be compensated for giving up his ownership interest?” and “What happens when a member dies?” You will need to talk this through with your partners now before these scenarios happen because when they do they have a tendency to end up in court and destroy decades worth of friendship.

S Corporation

Because an S Corporation is simply a corporation with a different tax structure, an S Corp must satisfy all compliance requirements as demanded of its brethren.

Annual Shareholders Meetings

Before you can start running your business, the first step after you have filed your Articles of Incorporation is to hold your first annual shareholders meeting to elect the directors of your corporation. The meeting minutes and the voting decisions made in the meeting must be recorded. Templates for meeting minutes are freely and readily available on the Internet.

Initial Board Meeting

Immediately following the initial shareholders’ meeting, the directors will hold the initial board meeting. In this meeting, the board of directors will nominate the officers of the company. Again, the decisions must be recorded in detail.

Corporate Bylaws

Next you will need to prepare the Corporate Bylaws, much like the Operating Agreement of an LLC, detailing the rules governing the operation of the business. You do not need to file this document with the state, but you will need to keep it in your records for whenever a shareholder demands to review the bylaws.

Stock Issuance

To prove your ownership interest in the corporation, you will need to issue stock certificates to each shareholder. You don’t need a fancy, forgery-proof certificate. Just make sure it is signed by the officers and well documented (i.e. record the amount of capital contributed in exchange for the shares).

Resolutions

Any major decisions in a corporation such as opening a bank account, entering into a revolving credit agreement, and purchase and sale or major assets, mergers and acquisitions and dissolution must be recorded in detail.

Comparing an LLC to an S Corp

Compared to an LLC, the formality requirements for an S Corporation can be overwhelming. However, these paperwork requirements also force you to treat your business like one. When creditors, lawyers and IRS scrutinize your records, you will be grateful that you have everything in written order. It’s no longer just your words against theirs. I don’t enjoy doing all the paperwork, but since I lack discipline, I need rules to help keep me organized. After considering the pros and cons based on the articles in this series, I convinced myself to go with an S corporation. To paraphrase Warren Buffett, “I’m very good at convincing myself.”

I have to admit, reading up on the laws and guidance on how to setup a company is exhausting and a pain in the butt. The first step in setting up a corporation, an S Corporation in my case, is quite intimidating.

After arming myself with what I learned from Nolo and the California Secretary of State (SoS) website, I prepared the Articles of Incorporation for my company based on samples available via the Internet. The guide from the California SoS website is very helpful. It tells me the bare bones elements I need to include in the Articles of Incorporation to get certified. So I followed the instructions and copied some languages from samples and decided to print it and hand deliver to the local regional SoS office here in Los Angeles.

Getting to the SoS office is not a fun drive, especially since I hate the one-way streets in downtown. There’s a Joe’s Parking next to the Ronald Reagan building where the SoS office is located. So I parked there. Cost me $9.00! I’m not sure whether I should be glad that submitting the Articles of Incorporation merely took me about 15 minutes or furious for paying $9 for 15 minutes worth of parking. There is a short biographical form I had to fill out at the counter and hand over a $15 check for the processing fee and another $100 check for the registration.

“Do you want it in the mail or pick it up?” asked the clerk. “How long does it take to process if I chose the mail route?” I asked. The clerk said it’s about the same and recommended I go with the mail because it’s more convenient. I concurred. So, the clerk promptly sent me on my way home.

About a week later, I received the mail from the SoS office. Rejected! Arrgh! Okay, let’s see what is wrong. The legal review notes contained instructions to remove the registered agent’s address, an article and the officer titles. Since I’m using NRAI as my registered agent, I shouldn’t have listed their address. I made the corrections and went back to the SoS office. This would cost me another $15 of processing fee.

I was quite disappointed when I received another rejection letter from the SoS office. I was somewhat consoled by the fact that the California SoS office was both generous and sympathetic towards my legal incompetence, so they waived the $15 processing fee and returned the check to me. This time one of the legal review notes was highlighted. Apparently, I missed out on one of the required corrections. Since I’m listing the initial directors, all listed directors must sign the Articles of Incorporation twice. Yes, you wouldn’t have guessed. Once for signing the Articles and the second is for acknowledging you are the person who executed the Articles. So, I quickly made the correction and handed the Articles to the clerk for the third time, along with another $15 check of course.

Third time’s a charm. This time I celebrated a small victory with a muffled “Yes!” and a clenched fist. And thus, Qovax is born. Having gone through the pain of rejection, which nobody should have to go through, I came up with IncBaby, a free tool that allows you to incorporate without a lawyer.

If you’re still debating how much it costs to setup a company, stop. Head over to IncBaby.com, fill out the six question form. Review the Articles of Incorporation generated instantly. Make as many changes as you want. Then print it. Sign the Articles and mail it or hand deliver to your local California regional SoS office. Detailed instructions are included so you don’t have to google anything. Since I’ve only incorporated in California, IncBaby only generates Articles of Incorporation for California. If you’d like to see other states included, please let me know. I’ll try my best to accommodate.

Once you have tried out IncBaby, let us know what you think. If you love it, share it with your friends. Tell them to stop finding excuses not to start a company. Start building your product already! If you hate it, we’d like to hear your opinion even more. It’ll help us grow and learn from mistakes, which, as you can tell, I’m very good at making.