11

Starting Your Own IT Starting Your Own IT CompanyCompany

Laura EwingLaura Ewing

Cathy ByrnesCathy Byrnes

Matt SchlangerMatt Schlanger

2

ObjectivesObjectives

► Why this topic is important to managersWhy this topic is important to managers► Definition of an entrepreneur and personality Definition of an entrepreneur and personality

characteristicscharacteristics► Phases of a start-up business and successful Phases of a start-up business and successful

attributesattributes► Can entrepreneurship be taught?Can entrepreneurship be taught?► Case studiesCase studies

Suzanne Joyce – TechGuard Security Suzanne Joyce – TechGuard Security Greg Sullivan – G.A. SullivanGreg Sullivan – G.A. Sullivan Adam Buffa – Buffa-Tech, LLCAdam Buffa – Buffa-Tech, LLC

► Realistic look at how a business can beginRealistic look at how a business can begin► ResourcesResources

3

EntrepreneurEntrepreneur

► ““A person who habitually creates and A person who habitually creates and innovates to build something of innovates to build something of recognized value around perceived recognized value around perceived opportunities”opportunities”

1.1. Initiatiative takingInitiatiative taking

2.2. The organizing and reorganizing of social and The organizing and reorganizing of social and economic mechanisms to turn resources and economic mechanisms to turn resources and situations to practical accountsituations to practical account

3.3. The acceptance of risk or failure. The acceptance of risk or failure.

(Gardner, 1995) (Hirsch, Peters, & Shepherd, 2005)

4

High-Tech EntrepreneurHigh-Tech Entrepreneur

►High level of educationHigh level of education Undergraduate or Graduate levelUndergraduate or Graduate level Science and TechnologyScience and Technology

►Access to a network of associates Access to a network of associates Business & Technical Business & Technical

►Primary MotivationPrimary Motivation Desire for independence Desire for independence Self-achievementSelf-achievement

(Roberts, 1989)

5

Level of EducationLevel of EducationHigher in Entrepreneurial Higher in Entrepreneurial

ActivitiesActivities

http://www.sba.gov/advo/research/rs256tot.pdf

Viewed on 4/22/06Viewed on 4/22/06SBA Office of SBA Office of AdvocacyAdvocacy

6

Motivation for Launching anMotivation for Launching an IT Start-up IT Start-up

19%

30%

12%

39% ChallegeMoneyIndependenceOther

(Bolton & Thompson 2004)

7

Entrepreneurial TraitsEntrepreneurial Traits

1)1) InternalInternal locus of controllocus of control2)2) CreativityCreativity3)3) AchievementAchievement orientedoriented4)4) DriveDrive5)5) OptimismOptimism6)6) Self-esteemSelf-esteem7)7) Risk- takingRisk- taking8)8) Recognizes opportunityRecognizes opportunity9)9) Openness to changeOpenness to change

(Koh, 1996, Sexton & Smilor, 1986)

8

What Triggers What Triggers EntrepreneurshipEntrepreneurship

► Opportunity TriggerOpportunity Trigger ““Being at the right place at the right time”.Being at the right place at the right time”. Potential for growthPotential for growth

► Technology Trigger - Recognition of: Technology Trigger - Recognition of: New or different types of technology New or different types of technology New or different Applications for technologyNew or different Applications for technology

► Cultural TriggerCultural Trigger Environmental stimulation: formation, Environmental stimulation: formation,

growth, & development growth, & development

(Bolton & Thompson 2004)

““setting off the initial setting off the initial spark”spark”

9

Start-UpStart-UpImportance to ManagersImportance to Managers

► ROI is greater in ROI is greater in regions that support regions that support entrepreneurshipentrepreneurship

► New Technology New Technology Start-ups drive Start-ups drive regional growthregional growth

► Quality labor pool Quality labor pool with IT Start-upswith IT Start-ups

http://www.sba.gov/advo/research/rs256tot.pdf Viewed on 4/22/06Viewed on 4/22/06SBA Office of SBA Office of AdvocacyAdvocacy

10

Key Economic IndicatorsKey Economic Indicators

High Entrepreneurial AreasHigh Entrepreneurial AreasVersusVersus

Low Entrepreneurial AreasLow Entrepreneurial Areas

http://www.sba.gov/advo/research/rs256tot.pdf

Key Economic Key Economic IndicatorIndicator

Most Most Innovative/entreInnovative/entrepreneurial preneurial regionsregions

Least Least Innovative/entreInnovative/entrepreneurial preneurial regionsregions

Percent Percent DifferenceDifference

Average Annual Average Annual EmploymentEmployment

2.60%2.60% 1.20%1.20% 117%117%

Average Annual Average Annual Wage GrowthWage Growth

7.00%7.00% 4.40%4.40% 59%59%

Average Annual Average Annual ProductivityProductivity

4.90%4.90% 2.40%2.40% 104%104%

Average Number Average Number of New Firm of New Firm BirthsBirths

40404040 304304 42%42%

Viewed on Viewed on 4/22/064/22/06

11

Benefits to societyBenefits to society

Create jobsCreate jobs Create products and Create products and

provide services provide services previously not previously not availableavailable

Improve our style of Improve our style of livingliving

(Paulsell, 2005) (Tracy, 2006)

12

Personal BenefitsPersonal Benefits

► Control over their Control over their liveslives

► Report to Report to themselves.themselves.

► Can work at homeCan work at home► Potential to increase Potential to increase

their own income.their own income.

(Paulsell, 2005) (“Starting small business is appealing and challenging.” 2005)

13

DrawbacksDrawbacks

► ““Being your own boss Being your own boss can be overrated”can be overrated”

Jerry Burnett of Burnett Jerry Burnett of Burnett Automotive ServicesAutomotive Services

► Constant dedication Constant dedication and sacrificeand sacrifice

► 80% of new ventures 80% of new ventures will fail within 5 yearswill fail within 5 years

(Butler, p.3) (Butler, p.3) (“Starting small business is appealing and challenging.” 2005)

14

ChallengesChallenges

►Finding capital or Finding capital or venture capitalventure capital

►Gaining Gaining experienceexperience

►Finding the right Finding the right helphelp

(Pearsall, 1997) (Phillips, 2005)(Pearsall, 1997) (Phillips, 2005)

15

Types of Venture CapitalTypes of Venture Capital► Boot-StrappingBoot-Strapping

Non- traditional forms of financial Non- traditional forms of financial support support

Personal credit cards Personal credit cards Personal savings, Personal savings, Loans from friends and relativesLoans from friends and relatives

► Business AngelsBusiness Angels Wealthy IndividualsWealthy Individuals

► Private Venture CapitalPrivate Venture Capital Consortium of investors or fund Consortium of investors or fund

managers managers

► Corporate Venture capitalCorporate Venture capital Investment money large Investment money large

corporationcorporation► Intel - Intel CapitalIntel - Intel Capital► IBM – NetGen IBM – NetGen

Venture Capital Disbursements

0

20

40

60

80

100

Year 1996 1997 1998 1999 2000 2001 2002

Year

% o

f Cap

ital IT Specific

Other

(Bolton & Thompson, 2004)(Bolton & Thompson, 2004)(Van Osnabrugge & Robinson, 2000)(Van Osnabrugge & Robinson, 2000)

16

SMALL BUSINESS SMALL BUSINESS INDICATORSINDICATORS

VentureVenture

Investment 2001 2002 2003 2004 2005Investment 2001 2002 2003 2004 2005

# Deals 4456 3057 2865 2966 2939# Deals 4456 3057 2865 2966 2939

InvestmentInvestment 40.740.7 21.7 21.7 19.6 21.6 19.6 21.621.721.7

(Billions of dollars)(Billions of dollars)

http://www.sba.gov/advo/research/sbqei0504.pdfhttp://www.sba.gov/advo/research/sbqei0504.pdf

Viewed on 4/22/06Viewed on 4/22/06

SBA Office of AdvocacySBA Office of Advocacy

17

Successful Launch of New IT Successful Launch of New IT start-upsstart-ups

► Target market growth Target market growth ratesrates

► Timing of market Timing of market entry entry

► Near-term revenue Near-term revenue potential and potential and

► Impact of the cyclical Impact of the cyclical nature of the industrynature of the industry

GROWTHGROWTH

RATE OF RATE OF

MARKETMARKET

GROWING CONCERN GROWING CONCERN FOR BUSINESS & FOR BUSINESS & GOVT.GOVT.

INCREASED DEMAND INCREASED DEMAND FOR SECURITY FOR SECURITY WITH INCREASED WITH INCREASED DATA STORAGE & DATA STORAGE & ACCESSACCESS

TIMINGTIMING

OF THEOF THE

MARKETMARKET

EXCELLENT TIMING EXCELLENT TIMING

NEED FOR SECURITY NEED FOR SECURITY WITH DATA WITH DATA SOFTWARE & SOFTWARE & NETWORK NETWORK SECURITYSECURITY

REVENUEREVENUE

FLOWFLOW

REVENUES FROM REVENUES FROM BUSINESS BUSINESS SECURITY NEEDSSECURITY NEEDS

RAPID REVENUE RAPID REVENUE GROWTH GROWTH INCREASING INCREASING DEMANDDEMAND

CYCLICALCYCLICAL

NATURE OFNATURE OF

MARKETMARKET

LESS EFFECT FROM LESS EFFECT FROM CYCLICAL MARKETCYCLICAL MARKET

IS A BASIC NEED FOR IS A BASIC NEED FOR BUSINESS & GOVT.BUSINESS & GOVT.

(Umesh, Huynh, & Jessup, 2005)(Umesh, Huynh, & Jessup, 2005)

Security Technology

18

STAGES OF AN IT START-UPSTAGES OF AN IT START-UP

►CONCEPT STAGECONCEPT STAGE►SEED STAGESEED STAGE►START-UP STAGESTART-UP STAGE►EXPANSION STAGEEXPANSION STAGE► IPO/ACQUISITION/BUYOUT STAGEIPO/ACQUISITION/BUYOUT STAGE

(Swanson & Baird, 2003)

19

CONCEPT STAGECONCEPT STAGE►Entrepreneur comes up with a creative Entrepreneur comes up with a creative

idea or innovationidea or innovation

SEED STAGESEED STAGE► Ideas or innovation are refinedIdeas or innovation are refined►Prototype has potentialPrototype has potential►Early-Stage financing needed to Early-Stage financing needed to

develop prototypedevelop prototype►Very High RiskVery High Risk

(Swanson & Baird, 2003)

20

START-UP STAGESTART-UP STAGE

► 1 to 2 years1 to 2 years► First-Stage First-Stage

financingfinancing► Product Product

Development PhaseDevelopment Phase► Manufacturing & Manufacturing &

Marketing of Marketing of productproduct

► Very High RiskVery High Risk

(Swanson & Baird, 2003)

21

EXPANSION STAGEEXPANSION STAGE

► 2 to 5 years2 to 5 years► Second-Stage financingSecond-Stage financing

Working capital to support businessWorking capital to support business Business growing, No profit, High RiskBusiness growing, No profit, High Risk

► Third-Stage financingThird-Stage financing Break-evenBreak-even point , Moderate Risk point , Moderate Risk

► Fourth-Stage financingFourth-Stage financing Capital needed to sustain rapid growthCapital needed to sustain rapid growth Market Development Phase Market Development Phase Profitability achievedProfitability achieved Low RiskLow Risk

(Swanson & Baird, 2003)

22

Common Traits of Common Traits of Entrepreneurial CentersEntrepreneurial Centers

►Location near large, research oriented Location near large, research oriented universitiesuniversities

►Educated and technologically skilled Educated and technologically skilled labor labor

►Venture CapitalistsVenture Capitalists► Intellectual property lawyersIntellectual property lawyers►Cluster of new venture expertiseCluster of new venture expertise

MarketingMarketing Product designersProduct designers

http://www.neweconomyindex.org/metro/part5_page5.htmlViewed on 4/10/06Viewed on 4/10/06

23

Entrepreneurial CentersEntrepreneurial Centers

•Silicon Valley•Austin, Texas•North Carolina Research Triangle•Technology Corridor (Cambridge Mass. Area)

http://www.neweconomyindex.org/metro/part5_page5.htmlViewed on 4/10/06Viewed on 4/10/06

24

Can Entrepreneurship be Can Entrepreneurship be taught?taught?

► University of Arizona – 2002 studyUniversity of Arizona – 2002 study Classes can:Classes can:

► Teach basic skillTeach basic skill► Speed up learning process for those with entrepreneurial Speed up learning process for those with entrepreneurial

traitstraits► Force students to make a deadlineForce students to make a deadline

Entrepreneur majors or MBA’s with this emphasis:Entrepreneur majors or MBA’s with this emphasis:► Earn an average of $23,500 more in regular jobs than Earn an average of $23,500 more in regular jobs than

business majorsbusiness majors ► Five years after graduation, earn 27% higher or $72,000 Five years after graduation, earn 27% higher or $72,000

more than graduates with business degrees or MBA’s more than graduates with business degrees or MBA’s alonealone

► Three times more likely to start a company with average Three times more likely to start a company with average annual sales of about $50 millionannual sales of about $50 million

(Gray, 2006)(Gray, 2006)

25

Benefits of entrepreneurial Benefits of entrepreneurial programsprograms

► Learning basic skill Learning basic skill and ethicsand ethics

► Making ConnectionsMaking Connections► Raising CapitalRaising Capital► Making mistakes Making mistakes

before entering the before entering the real worldreal world

(Gray, 2006)(Gray, 2006)

26

Entrepreneurial ProgramsEntrepreneurial Programs

► According to Jerome Katz, a According to Jerome Katz, a management professor at St. management professor at St.

Louis University:Louis University: Entrepreneurial programs are Entrepreneurial programs are

among the fastest growing in among the fastest growing in the nationthe nation

► According to the Ewing Marion According to the Ewing Marion

Kauffman Foundation survey:Kauffman Foundation survey: 1,992 colleges and universities 1,992 colleges and universities

offer courses on offer courses on entrepreneurship compared to entrepreneurship compared to about 300 in 1984-85about 300 in 1984-85

(Gray, 2006)(Gray, 2006)

27

Mary PaulsellMary Paulsell

““In the end, it makes little difference, as In the end, it makes little difference, as long as we continue to provide long as we continue to provide opportunities for them and create the opportunities for them and create the right environment in which they can right environment in which they can succeed.”succeed.”

(Paulsell, 2005)(Paulsell, 2005)

2828

UMSL’s entrepreneur UMSL’s entrepreneur class next Fallclass next Fall

BUS AD 4614BUS AD 4614 Entrepreneurship/Small Entrepreneurship/Small Business ManagementBusiness Management

(Hauff, Alan. Telephone interview. 13 April 2006.(Hauff, Alan. Telephone interview. 13 April 2006.))

29

TechGuard SecurityTechGuard Security

► Suzanne JoyceSuzanne Joyce

► Network security for Network security for Government Agencies Government Agencies and Businessesand Businesses

► 95 % Government 95 % Government and R&Dand R&D

(Joyce, Suzanne. Telephone interview. 11 April 2006.)

30

Her PersonalityHer Personality

►““Type A+”Type A+”►““Slightly ADD, Slightly ADD,

maybe not so slightly”maybe not so slightly”►““Coffee Addicted”Coffee Addicted”►““Positive”Positive”►Natural SalespersonNatural Salesperson

(Joyce, Suzanne. Telephone interview. 11 April 2006.)

31

Funding & SupportFunding & Support

►Wanted to give 10% of the company Wanted to give 10% of the company for 10 million dollarsfor 10 million dollars

►Started Feb. 2000, at the beginning of Started Feb. 2000, at the beginning of the dot com crashthe dot com crash

►No more easy money No more easy money Friends and FamilyFriends and Family BootstrappedBootstrapped Incubator and other Entrepreneur GroupsIncubator and other Entrepreneur Groups

(Joyce, Suzanne. Telephone interview. 11 April 2006.)

32

What keeps you up at night?What keeps you up at night?

►Financial issuesFinancial issues►Personal responsibly for employees Personal responsibly for employees

that rely on the businessthat rely on the business►Personal responsibly for investors Personal responsibly for investors

that are taking a chance on the that are taking a chance on the businessbusiness

(Joyce, Suzanne. Telephone interview. 11 April 2006.)

33

Her SuggestionsHer Suggestions►Find a mission or a focusFind a mission or a focus►Attract people with your passionAttract people with your passion►Don’t do it for the money, but because Don’t do it for the money, but because

it is important to youit is important to you►Don’t try to be everythingDon’t try to be everything

Build a team not like yourself so you can Build a team not like yourself so you can compliment each othercompliment each other

►Use the resources available to youUse the resources available to you especially other in the Entrepreneur especially other in the Entrepreneur

communitycommunity(Joyce, Suzanne. Telephone interview. 11 April 2006.)

34

Case StudyCase Study Greg SullivanGreg Sullivan

► 1982: 1982: FoundedFounded Used Boot-StrappingUsed Boot-Strapping Custom software for businesses Custom software for businesses

using the IBM PCusing the IBM PC► 1992: 1992: Expansion StageExpansion Stage

$335,000 in revenue ,25 employees$335,000 in revenue ,25 employees► 2000: 2000: Experiences rapid growthExperiences rapid growth

22 million in revenue, 300 employees22 million in revenue, 300 employees► 20042004: Buyout Stage: Buyout Stage

30 million in revenue, 350 employees30 million in revenue, 350 employees► 20042004: Sold to Avande Inc: Sold to Avande Inc

Undisclosed selling priceUndisclosed selling price► 2006: 2006: CEO Global VelocityCEO Global Velocity

Innovative reprogrammable Innovative reprogrammable hardware solutionhardware solution

► At Early Start-up StageAt Early Start-up Stage Raised 1.7 million used Business Raised 1.7 million used Business

AngelsAngels Ready to leave incubator - Ready to leave incubator -

Technology Entrepreneur CenterTechnology Entrepreneur Center

““The company specializes in The company specializes in providing e-business solutions for providing e-business solutions for middle market companies, E-middle market companies, E-business start-ups, as well as business start-ups, as well as Fortune 500 companies” (St. Fortune 500 companies” (St. Louis Commerce Magazine, Jul, Louis Commerce Magazine, Jul, 2000)2000)

(Sullivan.Greg Telephone interview. 11 April 2006.)

35

Greg’s AdviceGreg’s Advice► ““Quality prevails ultimately, but brief periods when Quality prevails ultimately, but brief periods when

sizzle has more appeal” sizzle has more appeal”

► ““Starting your own business is not for everybody Starting your own business is not for everybody only if you’re in a position to take career risk”only if you’re in a position to take career risk”

► ““You must be serious about business but at the You must be serious about business but at the same time have fun while your doing it, when its same time have fun while your doing it, when its not fun its time to get out”not fun its time to get out”

► Be prepared to adapt to the changes in business Be prepared to adapt to the changes in business and technology “I changed the way we did business and technology “I changed the way we did business to better use the internet”to better use the internet”

(Sullivan.Greg Telephone interview. 11 April 2006.)

36

Key points we learned from Key points we learned from GregGreg

► Technology presents opportunityTechnology presents opportunity

► Need vision, drive, and a network of good Need vision, drive, and a network of good peoplepeople

► Requires sacrifices before you reap rewardsRequires sacrifices before you reap rewards

► Personal satisfaction and a sense of Personal satisfaction and a sense of accomplishmentaccomplishment

(Sullivan.Greg Telephone interview. 11 April 2006.)

37

Buffa-Tech, LLCBuffa-Tech, LLC

► Adam BuffaAdam Buffa► Buffa-Tech, LLCBuffa-Tech, LLC

► Goal: To provide Goal: To provide technology and technology and accounting support accounting support to small businesses to small businesses and homes in the St. and homes in the St. Louis area.Louis area.

“Providing Small Businesses the Personal Attention They Deserve”

http://www.buffa-tech.com/index.htm Accessed 4 April 2006http://www.bnistl.com/memberdetails.php?ID=1349 4 April 2006

38

Why did Adam decide to Why did Adam decide to start his own business?start his own business?

► ChangeChange► Passion for technologyPassion for technology► IT companies skip over IT companies skip over

small businessessmall businesses► If he can perform IT services If he can perform IT services

for one small company, why for one small company, why not for othersnot for others

► Always willing to try Always willing to try something newsomething new

► Not afraid of failureNot afraid of failure

(Buffa, Adam. Telephone interview. 6 April 2006.)

39

FundingFunding

Took $1000 from his savings account and Took $1000 from his savings account and opened a checking account for the opened a checking account for the businessbusiness

Produced enough income to keep the Produced enough income to keep the business operating and to receive a salarybusiness operating and to receive a salary

Fortunate to have his former employer as Fortunate to have his former employer as a clienta client

(Buffa, Adam. Telephone interview. 6 April 2006.)

40

Non-financial SupportNon-financial Support

His wifeHis wife Business Network International of Missouri Business Network International of Missouri

~ Southern Illinois (BNI)~ Southern Illinois (BNI)►Helped him market his businessHelped him market his business►Positioned him in front of other business Positioned him in front of other business

owners and prospectsowners and prospects►Helped him to establish a routineHelped him to establish a routine

(Buffa, Adam. Telephone interview. 6 April 2006.)

41

What keeps Adam up at What keeps Adam up at night?night?

► Being asked to fix Being asked to fix something or something or perform a task that perform a task that he is unable to he is unable to accomplishaccomplish

► Finding clientsFinding clients

(Buffa, Adam. Telephone interview. 6 April 2006.)

42

Personality traits he thinks Personality traits he thinks entrepreneurs should entrepreneurs should

possesspossess► Willing to fail, take Willing to fail, take

risks, accept failure, risks, accept failure, and move onand move on

► OutgoingOutgoing► Able to sell one’s Able to sell one’s

businessbusiness► OrganizedOrganized► Know who to turn to Know who to turn to

for help for help

(Buffa, Adam. Telephone interview. 6 April 2006.)

43

Adam’s advice for future Adam’s advice for future entrepreneursentrepreneurs

► If accounting is not If accounting is not your strong point – your strong point – find help!find help! This will save you This will save you

time and money!time and money!

(Buffa, Adam. Telephone interview. 6 April 2006.)

44

Key points we learned from Key points we learned from AdamAdam

► Be able to sell/market your businessBe able to sell/market your business

► Know who to turn to for help Know who to turn to for help

►Be willing to take risks, fail, Be willing to take risks, fail, accept failure, and know when to accept failure, and know when to move on!move on!

(Buffa, Adam. Telephone interview. 6 April 2006.)

4545

““Start Your Own IT Start Your Own IT Company”Company”

A Step-by-Step ExampleA Step-by-Step Example

46

►Many books, trade publications, and Many books, trade publications, and information sources out on starting information sources out on starting your own business.your own business.

►Although many qualified sources Although many qualified sources were used in this story, it is not a were used in this story, it is not a technical how-to guidetechnical how-to guide

►Each business is different but in Each business is different but in order to avoid broad generalizations order to avoid broad generalizations this story is very specificthis story is very specific

DisclaimerDisclaimer

KEEPING IT KEEPING IT REALREAL

47

Companies InvolvedCompanies Involved

KEEPING IT KEEPING IT REALREAL

► OfficeMaxOfficeMax► PC House CallsPC House Calls► Safeco InsuranceSafeco Insurance► Scopel & AssociatesScopel & Associates► Softwaire Centre InternationalSoftwaire Centre International► St. John & Co. AccountantsSt. John & Co. Accountants► St. Louis Business JournalSt. Louis Business Journal► St. Louis County Government St. Louis County Government

officeoffice► Stephen Finch & Associates IncStephen Finch & Associates Inc► Sunset Office SuitesSunset Office Suites► TigerDirect.comTigerDirect.com► Vistaprint.comVistaprint.com► Yahoo.comYahoo.com► YellowbookYellowbook► YellowpagesYellowpages

► AdsellAdsell► Bank of AmericaBank of America► City of Maryland Heights City of Maryland Heights

Government officeGovernment office► Computer Concepts Inc.Computer Concepts Inc.► Computer EaseComputer Ease► Computer NerdzComputer Nerdz► Data Science CorpData Science Corp► Data-marqData-marq► Friendly ComputersFriendly Computers► Godaddy.comGodaddy.com► Google.comGoogle.com► InfoUSAInfoUSA► Kaiser Law FirmKaiser Law Firm► Kama Inc.Kama Inc.

48

KEEPING IT KEEPING IT REALREAL

► Jane PevelyJane Pevely Graduated BS in Computer Science, 2000Graduated BS in Computer Science, 2000 Working as programmer ever senseWorking as programmer ever sense Making good money, but hates the cubicalMaking good money, but hates the cubical Too social to continue this career foreverToo social to continue this career forever

►Would like to start a small on-site Would like to start a small on-site computer repair businesscomputer repair business

About JaneAbout Jane

49

Company NameCompany Name Per Per HourHour

TraveTravell

Computer NerdzComputer Nerdz $99.00$99.00 $0$0

PC House CallsPC House Calls $89.00$89.00 $25$25

ComputereaseComputerease $89.00$89.00 $0$0

Softwaire Centre Softwaire Centre InternationalInternational

$110.0$110.000

$0$0

Computer Concepts, Inc.Computer Concepts, Inc. $85.00$85.00 $45$45

Friendly ComputersFriendly Computers $88.00$88.00 $5$5

(Based on phone conversation, 21 April 2006.)

CompetitorsCompetitors

KEEPING IT KEEPING IT REALREAL

50

KEEPING IT KEEPING IT REALREAL

►Decides on $75 an hour.Decides on $75 an hour.►Goal: to maintain 15 hours a week Goal: to maintain 15 hours a week

for a full yearfor a full year►$75 x 15 hours x 48 weeks =$75 x 15 hours x 48 weeks =

$54,000 gross $54,000 gross incomeincome

►Will work part-time until the goal is Will work part-time until the goal is reachedreached

Business GoalBusiness Goal

51

KEEPING IT KEEPING IT REALREAL

►$150 an hour$150 an hour►Comes prepared with questionsComes prepared with questions►Supports LLC or Inc. to protect Supports LLC or Inc. to protect

personal assetspersonal assets►Suggests business insuranceSuggests business insurance►Reviews and makes suggestions on Reviews and makes suggestions on

Jane’s service contractsJane’s service contracts

Lawyer ConsolationLawyer Consolation

(Paul Kaiser, Kaiser Law Firm, phone conversation, 21 April 2006.)

52

KEEPING IT KEEPING IT REALREAL

►Small, low risk company more Small, low risk company more concerned with taxes than legal concerned with taxes than legal liabilityliability

►Prefers the Inc. over LLC because it Prefers the Inc. over LLC because it “has been around longer” and the “has been around longer” and the rules are more established than the rules are more established than the LLCLLC

►Suggests Inc. filed as an S-corporation Suggests Inc. filed as an S-corporation to avoid double taxationto avoid double taxation

Accountant ConsolationAccountant Consolation

(Scopel & Associates, St. John & Co Accountants, Stephen Finch & Associates, Inc., phone conversations, 21 April 2006.)

53

► Missouri Secretary Missouri Secretary of State’s website to of State’s website to search current search current business namesbusiness names

► LikesLikes““Jane’s PC Repair, Inc.”Jane’s PC Repair, Inc.”

Business NameBusiness Name

(https://www.sos.mo.gov/BusinessEntity/soskb/csearch.asp, 21 April 2006.)

KEEPING IT KEEPING IT REALREAL

54

KEEPING IT KEEPING IT REALREAL

► Although it would Although it would only cost her $58 only cost her $58 to incorporate to incorporate online, she online, she chooses to pay the chooses to pay the $775 to the $775 to the accountant to accountant to have both the have both the business entity business entity and the tax and the tax information filed information filed correctlycorrectly

Returns to the Returns to the AccountantAccountant

(Scopel & Associates, St. John & Co Accountants, Stephen Finch & Associates, Inc., phone conversations, 21 April 2006.)

(See Appendix I for full details of how the $775 is spent.)

55

KEEPING IT KEEPING IT REALREAL

► Two months later the approved Two months later the approved Articles of Incorporation are receivedArticles of Incorporation are received

► Meeting at the kitchen tableMeeting at the kitchen table Jane’s Husband, Jack elected SecretaryJane’s Husband, Jack elected Secretary Review business planReview business plan Agree to file for a business licenseAgree to file for a business license Agree to open a business bank accountAgree to open a business bank account Agree to loan the business $10,000Agree to loan the business $10,000 Agree to repay Jane the money she spent Agree to repay Jane the money she spent

with the lawyer and accountantwith the lawyer and accountant

““Board of Directors” Board of Directors” MeetingMeeting

(Scopel & Associates, St. John & Co Accountants, Stephen Finch & Associates, Inc., phone conversation, 21 April 2006.)

56

KEEPING IT KEEPING IT REALREAL

► St. Louis County Government officeSt. Louis County Government office Merchant LicenseMerchant License Does NOT pay the $5 charge since she Does NOT pay the $5 charge since she

is running a service based company.is running a service based company.► Her county, City of Maryland HeightsHer county, City of Maryland Heights

file as a home-based businessfile as a home-based business pays the one-time occupancy inspection pays the one-time occupancy inspection

charge of $25charge of $25 And $25 per year charge for a business And $25 per year charge for a business

license. license.

Government LicensesGovernment Licenses

(St. Louis County Government office and City of Maryland Heights office, phone conversations, 21 April 2006.)

57

KEEPING IT KEEPING IT REALREAL

► Business checking account Business checking account for $11 per monthfor $11 per month

► Buys envelopes, paper, Buys envelopes, paper, toner, and gets her toner, and gets her contract printed at Office contract printed at Office Max for $157.23Max for $157.23

► Spends $80.59 at Spends $80.59 at TigerDirect.com on TigerDirect.com on computer repair toolscomputer repair tools

► Spends $50.03 for Spends $50.03 for “janespc.com” and a year “janespc.com” and a year of basic hostingof basic hosting

► Designs basic 5 page Designs basic 5 page website explaining her website explaining her servicesservices

The next dayThe next day

(Bank of America, OfficeMax, TigerDirect.com, GoDaddy.com, 21 April 2006.)

58

KEEPING IT KEEPING IT REALREAL

► According to her business According to her business plan, she is going to use plan, she is going to use primary direct mailprimary direct mail

► Purchases demographic Purchases demographic specific mailing list from specific mailing list from InfoUSA.com for $1,416.40InfoUSA.com for $1,416.40

► Purchases St. Louis Purchases St. Louis Business Journal’s listing of Business Journal’s listing of businesses for $149.95businesses for $149.95

► Bulk mail permit for $160 Bulk mail permit for $160 from US Postal Servicefrom US Postal Service

► Orders 5000 business Orders 5000 business cards and 5000 postcards cards and 5000 postcards from VistaPrint.com for from VistaPrint.com for $443.57$443.57

MarketingMarketing

(InfoUSA.com, St. Louis Business Journal, USPS, VistaPrint.com, 21 April 2006.)

59

KEEPING IT KEEPING IT REALREAL

►Yellow Pages Yellow Pages listing for $540 listing for $540 per yearper year

►Google Adwords Google Adwords budgeted $20 budgeted $20 per monthper month

►Yahoo express Yahoo express search $49search $49

Secondary MarketingSecondary Marketing

(YellowBook quote, http://www.google.com/ads/, http://searchmarketing.yahoo.com/srchsb/sse_pr.php, 21 April 2006.)

60

KEEPING IT KEEPING IT REALREAL

► $1,000,000 $1,000,000 insuranceinsurance Does not cover Does not cover

“workmanship” but “workmanship” but will cover accidentswill cover accidents

$500 per year$500 per year► Virtual OfficeVirtual Office

Physical mailing Physical mailing address $25 per address $25 per monthmonth

Live receptionist for Live receptionist for $100 per month$100 per month

Insurance and “Office”Insurance and “Office”

(SafeCo Insurance recommended by anonymous insurance agent in phone conversation, Sunset Office Suites phone conversation, 21 April 2006.)

61

Minimum Minimum Estimate Estimate for her for her

First Year First Year of of

BusinessBusiness

$8,481.77$8,481.77(Added all the following costs plus $1,000 for random expenses, estimate example only, not an exact science, refer to paper for complete

narrative)

Product or Service Cost

Hour consultation with Lawyer $150.00

Articles of Incorporation and Tax Information Filed $775.00

Bank of America Checking Account $132.00

Business License, Occupancy Permit, and Inspection $50.00

Office Max (Printing, Envelopes, Paper, Toner) $157.23

TigerDirect.com (Equipment) $80.59

GoDaddy.com (Website) $52.03

Vistaprint.com (5000 postcards, 5000 business cards) $443.57

YellowBook Ad $540.00

Yahoo Listing $49.00

Google Listing Up to $240

Bulk Mail Yearly Fee $160.00

Bulk Mail 2000 Letters $564.00

Bulk Mail 2000 Follow-up Postcards $522.00

Lead Listing from InfoUSA.com $1,416.40

St. Louis Business Listing $149.95

Business Insurance $500.00

Virtual Office (Live Receptionist and Mailing Address) $1,500.00

Random Expenses $1,000.00

Minimum Estimate for First Year of Business $8,481.77

KEEPING IT KEEPING IT REALREAL

62

Key PointsKey Points

►Make a planMake a plan

►More to starting a business than just More to starting a business than just the Articles of Incorporationthe Articles of Incorporation

►Find a good accountantFind a good accountant

63

ResourcesResources►http://www.missouribusiness.net/http://www.missouribusiness.net/►http://www.startupjournal.com/http://www.startupjournal.com/►http://www.entrepreneur.com/http://www.entrepreneur.com/►http://www.score.org/http://www.score.org/►http://http://www.sba.govwww.sba.gov//►http://http://www.sos.mo.govwww.sos.mo.gov//► Steingold, Fred S. Steingold, Fred S. Legal Guide for Starting & Legal Guide for Starting &

Running a Small BusinessRunning a Small Business, Berkeley: NOLO Publishing, , Berkeley: NOLO Publishing, 2006.2006.

64

ConclusionConclusion

► Why this topic is important to managersWhy this topic is important to managers► Definition of an entrepreneur and personality Definition of an entrepreneur and personality

characteristicscharacteristics► Phases of a start-up business and successful Phases of a start-up business and successful

attributesattributes► Can entrepreneurship be taught?Can entrepreneurship be taught?► Case studiesCase studies

Suzanne Joyce – TechGuard Security Suzanne Joyce – TechGuard Security Greg Sullivan – G.A. SullivanGreg Sullivan – G.A. Sullivan Adam Buffa – Buffa-Tech, LLCAdam Buffa – Buffa-Tech, LLC

► Realistic look at how a business can beginRealistic look at how a business can begin► ResourcesResources

QuestionsQuestions

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http://www.buffa-tech.com/about.htm Buffa-Tech, LLC. “Home Page.” 4 April 2006.

http://www.buffa-tech.com/index.htmBuffa-Tech, LLC. “Services.” 4 April 2006.

http://www.buffa-tech.com/catalog.htm Business Network International of Missouri ~ Southern Illinois (BNI). “Referral Masters Member: Adam Buffa.” 2002 – 2005. 4 April 2006.

http://www.bnistl.com/memberdetails.php?ID=1349 Butler, John E. Opportunity Identification and Entrepreneurial Behavior. Greenwich: Information Age Publishing, 2004.Bygrave, William D.;Zacharakis, Andrew, editors. The Portable MBA in Entrepreneurship Hoboken, NJ : J. Wiley & Sons, c2004. 3rd ed. Camp ,Michael S. “The Innovation-Entrepreneurship NEXUS: A National Assessment of Entrepreneurship and Regional Economic Growth and Development”, SBA Office of Advocacy, Advanced Research Technologies, LLC. April 2005.

http://www.sba.gov/advo/research/rs256tot.pdfCenter for Entrepreneurship and Economic Education. “Mission.” 2006. 10 April 2006. http://www.umsl.edu/~econed/mission.htmCity of Maryland Heights Government office. Telephone conversation. 21 April 2006.Computer Concepts Inc. Telephone conversation. 21 April 2006.Computer Ease. Telephone conversation. 21 April 2006.Computer Nerdz. Telephone conversation. 21 April 2006.Cross, Bernadette,; Travaglione, Anthony. “The Untold Story: Is the Entrepreneur of the 21st Century Defined by Emotional Intelligence?” International Journal of Organizational Analysis. 2003. Vol. 11, Iss. 3; p. 221 (8 pages)Cunningham, J. Barton, Lischeron, Joe. “Defining Entrepreneurship” Journal of Small Business Management. Milwaukee: Jan 1991. Vol. 29, Iss. 1; p. 45 (17 pages)Data Science Corp. Telephone conversation. 21 April 2006.Data-marq. Telephone conversation. 21 April 2006.Entrepreneur.com. “Home.” 2006. 10 April 2006. http://www.entrepreneur.com/ Friendly Computers. Telephone conversation. 21 April 2006.Godaddy.com. http://www.godaddy.com. 21 April 2006.Google.com. http://www.google.com. 21 April 2006.Gray, Patricia B. “10 cool colleges for entrepreneurs – These universities off some of the most innovative programs for fledgling business owners.” Fortune Small Business. March 2006. CNNMoney.com. Accessed 5 April 2006. http://money.cnn.com/magazines/fsb/fsb_archive/2006/03/01/8370304/index.htm

BibliographyGray, Patricia B. “Can entrepreneurship be taught? 0 Classes for would-be entrepreneurs are a hot trend at America’s universities. But can risk taking and originality be learned?” Fortune Small Business. March 2006. CNNMoney.com. Accessed 5 April 2006. http://money.cnn.com/magazines/fsb/fsb_archive/2006/03/01/8370301/index.htm Gray, Patricia B. “The school of hard knocks – What two empire builders wish they had learned in the classroom.” Fortune Small Business. March 2006. CNNMoney.com. Accessed 5 April 2006. http://money.cnn.com/magazines/fsb/fsb_archive/2006/03/01/8370302/index.htm Gulotta, Christopher J., Michael M. Membrado, and Alan M. Tarter. “The 10 Essentials of Attracting An Angel.” Westchester County Business Journal. March 2000. EBSCOhost. Accessed 22 March 2006. http://www.umsl.edu:2143/citation.asp?tb=1&_ug=sid+BBEA8268%2D2095%2D43EA%2DB28C%2DC40558F89769%40sessionmgr5+dbs+aph%2Cbuh%2Cbwh%2Clxh%2Cnfh%2Cufh+537C&_us=mh+1+frn+31+hd+False+hs+False+or+Date+mdbs+aph%2Cbuh%2Cbwh%2Clxh%2Cnfh%2Cufh+fh+False+ss+SO+sm+KS+sl+%2D1+dstb+KS+sel+False+ri+KAAACBYA00002700+CC71&_uso=%5F0&fn=31&rn=32 Jones, Marian M., “Why entrepreneurs take the plunge” Psychology Today. New York: Nov 1997. Vol. 30, Iss. 6; p. 22 (1 pageJoyce, Suzanne. Telephone interview. 10 April 2006.Hauff, Alan. Telephone interview. 13 April 2006.Hellstrom Tomas, ;Hellstrom,Christina; Berglund, Henrik. “The Innovating Self: Exploring Self Among a Group of Technological Innovators” Journal of Managerial Psychology. Bradford: 2002. Vol. 17, Iss. 4; p. 267 (20 pagesHisrich, Robert D., Peters, Michael P., Shepherd, Dean A. Entrepreneurship. 6 ed. New York: McGraw-Hill Irwin, 2005Hisrich, Robert D. “Entrepreneurship/Intrapreneurship” American Psychologist. February 1990. Vol. 45, Iss. 2; p. 209InfoUSA. http://www.infousa.com. 21 April 2006.Kaiser Law Firm. Telephone conversation. 21 April 2006.Kama Inc. Telephone conversation. 21 April 2006.Koh, Hian Chye. “Testing Hypotheses of Entrepreneurial Characteristics a Study of Hong Kong MBA Students” Journal of Managerial Psychology. Bradford: 1996. Vol. 11, Iss. 3; p. 12Mancuso, Anthony. Incorporate Your Business – A 50-State Legal Guide to Forming a Corporation. Berkeley, California: Nolo, 2004.Missouri Small Business Development Centers. “Missouri Small Business Start-up Kit.” 2005. 13 April 2006. http://www.umsl.edu/~smallbus/startup.htm Missouri Small Business Development Centers. “Missouri Business Resource Library.” 2006. 13 April 2006. http://www.missouribusiness.net/library/ Mitton, Daryl G. “The Compleat Entrepreneur” Entrepreneurship Theory and Practice. Waco: Spring 1989. Vol. 13, Iss. 3; p. 9 (11 pages)National Science Board 2006. Science and Engineering Indicators 2006, Two volumes, Arlington. VA: National Science Foundation (volume 1. NSB 06-01: volume 2. NSB 06-01 A). http://www.nsf.gov/statistics/seind06/pdfstart.htmOfficeMax. Telephone conversation. 21 April 2006.Paulsell, Mary. “What Makes An Entrepreneur?” Missouri Small Business Development Centers. December 2005. 13 April 2006. http://www.missouribusiness.net/docs/what_makes_entrepreneur.aspPC House Calls. Telephone conversation. 21 April 2006. Pearsall, Kathy. “Young meet old at CIO Summit.” Computing Canada. December 1997. EBSCOhost. Accessed 13 February 2006. http://www.umsl.edu:2099/pqdweb?index=51&did=25179559&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1145468881&clientId=45249

BibliographyPhillips, Bruce E. “The Next Level: Spotlight on Entrepreneurs – Flexibility and Creativity Spell Success for IT Entrepreneurs.” U.S. Black Engineer Magazine. September/October 2005. Accessed 15 February 2006. http://www.blackengineer.com/artman/publish/cat_index_26.shtmlRoberts, Edward B. “High Stakes for High-Tech Entrepreneurs: Understanding Venture Capital Decision Making”, Sloan Management Review. Winter 1991. Vol. 32, Iss. 2; p. 9 (12 pages)Roberts, Edward B. “The Personality and Motivations of Technological Entrepreneurs” Journal of Engineering and Technology Management. Amsterdam: Sep 1989. Vol. 6, Iss. 1; p. 5 (19 pages)Root, Hal and Steve Koenig. The Small Business Start-up Guide. Naperville, Illinois: Sourcebooks, Inc., 1994.Safeco Insurance, Kirnco. Telephone conversation. 21 April 2006.Scopel & Associates. Telephone conversation. 21 April 2006.Sexton Donald L.; Smilor, Raymond W.The Art and Science of Entrepreneurship Cambridge, Mass.: Ballinger Pub. Co., c1986Shaver ,Kelly G.,; Gartner, William B., ;Crosby, Elizabeth,; Bakalarova, Karolina,; Gatewood ,Elizabeth J. “Attributions About Entrepreneurship: A Framework And Process For Analyzing Reasons For Starting A Business” Entrepreneurship Theory and Practice. Waco: Winter 2001. Vol. 26, Iss. 2; p. 5 (28 pages)Shaver, Kelly G.; Scott, Linda R. “Person, Process, Choice: The Psychology Of New Venture Creation” . Entrepreneurship: Theory & Practice, Winter91, Vol. 16 Issue 2, p23-45.Smilor ,Raymond W. ; Gill, Michael Doud Jr. The New Business Incubator : Linking Talent, Technology, Capital, and Know-How .Lexington, Mass : Lexington Books, c1986.Singh, Gangaram; DeNoble, Alex. “Views on Self-employment and Personality: An Exploratory Study”. Journal of Developmental Entrepreneurship. Norfolk: Dec 2003. Vol. 8, Iss. 3; p. 265 (17 pages)Softwaire Centre International. Telephone conversation. 21 April 2006.St. Louis Business Journal. http://www.bizjournals.com/bookoflists/stlouis/. 21 April 2006.St. Louis Business Journal. “Entrepreneur.” 2006. 10 April 2006. http://stlouis.bizjournals.com/stlouis/entrepreneur/St. Louis County Government office. Telephone conversation. 21 April 2006.St. John & Co. Accountants. Telephone conversation and email. 21 April 2006.“Starting small business is appealing and challenging.” Tribune Business Weekly. August 2005. ProQuest. Accessed 13 March 2006. http://www.umsl.edu:2099/pqdweb?index=2&did=892678861&SrchMode=1&sid=7&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1145469462&clientId=45249 “Startup Journal” – Wall Street Journal – “Center for Entrepreneurs.” “Home.” 2006. 14 April 2006. http://www.startupjournal.com/ Stephen Finch & Associates Inc. Telephone conversation. 21 April 2006.Stovall, Jim. “Five Mistakes Entrepreneurs Make.” CPA Wealth Provider. October 2005. Accessed 15 February 2006. http://www.keepmedia.com/pubs/AccountingToday/2005/10/10/1044643?ba=m&bi=1&bp=7Sullivan, Greg. Telephone interview. 11 April 2006.Sunset Office Suites. Telephone conversation and http://sunsetofficesuites.com/_wsn/page4.html. 21 April 2006.Swanson, James A.; Baird, Michael L. Baird, Engineering Your Start-Up: A Guide for the High-Tech Entrepreneur Professional Publications, Inc. c 2003, 2nd ed.Technology Entrepreneur Center. “Home.” 13 February 2006. http://www.tecstl.org/index.asp

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Appendix IDate ___ /___ /200__Discuss strategy with client, incorporate, and Handle all filings for:_____________________________ , Inc.

Phase I: Develop strategies and filingsClient interview to determine issues and strategies of preliminary business planDetermine proposed Corporate name availabilityDevelop all necessary and pertinent information to scope project outDetermine type of entity and tax effects

$180.00

Phase II: Do IncorporationPreparation of Incorporation ArticlesFile Incorporation Articles with MO Secretary of State (includes travel)Pay all necessary filing fees on behalf of clientInitial Annual Report to Secretary of State & pay feesPreparation of Corporate By-LawsPreparation of Corporate Minutes of initial meeting of Incorporator and Director(s)Develop and prepare supporting exhibitsIssue StockPurchase Corporation book, Stock Certificates, Corporate Seal on behalf ofClient & pay fees.

$230.00

Phase III: Preparation of documents and registrations - Federal & State(s)Compile and file Federal, State, and Local:1. SS-4 Federal Identification Number2. DOR 860-1663, Corp. 65/m860-1103 State Withholding, Corp Registration3. Election of Sub S status form 2553 (if appropriate)4. Sales Tax Registration Form (if appropriate)5. Annual Secretary of State Report of Directors/Owners6. Section 351, Tax Free Rollover Election (if appropriate)7. Annual Franchise Tax Report (if appropriate)8. Election to Amortize Incorporation Costs9. Election to Amortize Start up cost

$275.00

Phase IV: FinalizeIssue StocksSet up meeting to discuss PayrollSet up and forward paperwork to bank to set up new accountDetermine amount of assets to be included in corporationMeet with client to finalize and sign all necessary documents

$ 90.00

Total Cost for Incorporation – Flat Fee$775.00

____________________________ __________ ____________________________ __________

Client Signature Date Incorporator Signature Date