Harri Sudhaann
How to Protect Your Business Idea Without a Patent. It's natural to fear that your idea might be stolen. But you can't turn your vision into reality without the help of others. Sooner or later, you're going to want to ask an industry expert to evaluate your product or service. You're going to need to collaborate with a manufacturer or distributor.
But patents cost thousands of dollars and take years to be issued. You can't afford to wait that long to start bringing your product to market. Thankfully, there are creative ways to actively protect your idea without applying for a patent. Here are four affordable strategies that will protect your business idea from being stolen: Do your research. Related: Why Filing a Patent Just Got More Complicated For Startups (Opinion) Use these three legal tools -- with the help and oversight of an attorney: Non-disclosure agreement (NDA): Have anyone you work with sign a non-disclosure agreement that commits them to confidentiality. Turn to the U.S. Related: 3 Games To Help You Generate Business Ideas. Non-Disclosure Agreement | Free Non-Disclosure Agreement Forms. What Every Entrepreneur Should Know About Valuations. Getting your first term sheet from a venture-capital firm is among the most exhilarating moments that you'll experience as an entrepreneur.
It probably sits up there with the college acceptance letter in the pantheon of milestones. Getting a call from an entrepreneur who has just received a term sheet is one of the highlights of my day. The excitement is palpable. But unlike the college acceptance letter, a venture term sheet can quickly be followed by the dread of trying to understand the gobbledy-gook that you've been presented with. So, what really matters in a term sheet? Valuations are driven by a handful of variables. The second thing you'll want to consider is the manner in which the pre-money valuation and the price per share that the venture investors pay is being calculated. Related: The Do's and Don'ts of Meeting With Investors So what should go into the denominator?
These are the issues that you should think about when considering the valuation in your term sheet. How to Value Your Startup. It's commonly said that business valuation is more art than science. If this is true, then the practice of valuing a startup business is squarely in the domain of the artist. Nevertheless, entrepreneurs need to put a value on their startups in order to raise money, and investors need to put a value on their investments to generate liquidity. Since neither entrepreneurs nor investors are known for right-brain artistic thinking, this article aims to provide some tips for left-brain thinkers to make sense of startup valuation. 1.
You are what the market says you are. However, this isn't always true. 2. Comparables: Find out how much similar companies in your industry and geography are worth. 3. This makes valuation particularly challenging for a startup. It's easy to get caught up in the excitement of valuing your company at the highest amount possible and forget that you'll one day have to deliver on the expectations of investors.
How Much Is This Business Worth? - Entreprenur.com. If you're interested in purchasing an existing business, here are a few ways to gauge its value. Q: I am looking into trying to buy an existing teashop. The owner said to make him on offer, but I'm not sure of the best way to determine the worth of the business. Do I ask to see his books or do I value it based on the existing clientele? What kind of time frames do I need to have to make this a reality? A: There are a lot of ways to value a business. You can start by looking at the value of the business's assets. The other valuation approaches all think of a business as a stream of cash.
Revenue is the crudest approximation of a business's worth. But alas, revenue doesn't mean profit. That's why earnings matter and why multiples of earnings may be a better way to think about valuation. Warren Buffett uses what's called a discounted cash-flow analysis. One quick and dirty technique is to divide the current yearly earnings by the long-term Treasury bill rate. How Should We Divide Equity Among Co-Founders?
I understand that one's share of equity should be contribution-based. However, when you are making arrangements with co-founders, is there a generic rule of thumb that you must follow? If you want to control future decisions of the startup as originator of the concept, how do you make sure to retain the full control? There are many different ways to approach equity compensation for the founding team. There is not necessarily a one-size fits all answer to this question. First, discuss compensation upfront with your co-founder(s) before you get to work and put it in writing. Try not to be emotional and selfish when discussing equity ownership with your co-founder(s). If you'd like to control the decision-making part of the business, you should be the majority owner of the company and have the majority of the board votes or greater than 50 percent.
How Should We Divide Equity Among Co-Founders? How to Attract Talent With Little Cash. Editor's Note: Entrepreneur's Ask the Expert column seeks to answer questions about everything from starting a business to growing one. To follow the column on Twitter -- and ask a question -- use hashtag #ENTexpert, or leave a comment below. Your query may be the inspiration for a future column. Q: It seems like investors want a team before they provide funding but a startup needs funding before they can attract great talent. So, how can I attract great talent with no capital, so I can present my strong team to investors?
It seems like the answer is always equity but in expensive places like Silicon Valley, my employees need something to live on. -Lacey Guyick A: You’re absolutely right. Before backing a business, VCs generally want to see that the entrepreneur was able to excite other people and get them to join a team and build a business. Related: 5 Best Places to Find Qualified Talent While, there is no clear-cut answer, here are some factors to keep in mind: Licensing Definition | Small Business Encyclopedia. Definition: A business arrangement in which one company gives another company permission to manufacture its product for a specified payment . There are few faster or more profitable ways to grow your business than by licensing patents, trademarks, copyrights, designs, and other intellectual property to others. Licensing lets you instantly tap the existing production, distribution and marketing systems that other companies may have spent decades building.
In return, you get a percentage of the revenue from products or services sold under your license. Licensing fees typically amount to a small percentage of the sales price but can add up quickly. For example, about 90 percent of the $160 million a year in sales at Calvin Klein Inc. comes from licensing the designer's name to makers of underwear, jeans and perfume. The only merchandise the New York-based company makes itself, in fact, are its women's apparel lines. For a sure thing, prepare for a frustrating search. The Complete Inventor's Guide. One of the strengths of our free-market economic system is competition.
After all, because of competition, we have choices in both quality and price in the services we use, the places we shop and the products we buy. However, if you are an inventor or manufacturer of a new product, competition can be a major problem. For this reason, I am often asked how to protect an invention or new product from being stolen or "knocked off. " In my experience, the answer to the competitive challenges is to create a strategy based on the goals for the invention, the specific product itself, and the approach to be taken. Inventors take one of two main approaches to making money with their invention: licensing the invention to another company or becoming a manufacturer themselves. There is some overlap in strategy for these two approaches. Before outlining some strategic options, I should mention that the magnitude of fear of showing others an invention at this stage is often overblown. 5 Signs You're Standing In Your Own Way to Success.
While a lot of the entrepreneurs I've met and mentored in the past decade have been successful, I've probably met as many, if not more, unsuccessful entrepreneurs. Each of them seemed to make a lot of the same mistakes -- ones that could be easily remedied, but when left unaddressed, could mean the difference between success and failure. Here are five signs you're getting in your own way to success and how to move over and let yourself be the best you can be: 1. You're unable to complete a task before starting a new one. Some entrepreneurs just cannot finish. For whatever reason, it doesn't matter how much time they have or how many resources are available to them -- they can't focus and get something done. Maybe it's the fear that their final product could be better, or they're worried it isn't perfect and they won't be able to make changes later.
But Seth Godin got it right in his book Linchpin: Are You Indispensable? I always say, if it's 80 percent there, it's good enough. 2. 3. 4. The 7 Sleep Habits of Successful Entrepreneurs. We all know lack of sleep is harmful to our health -- sleep affects mood, increases risk of psychiatric disorders and depression, cardiovascular disease and lowers immune system health. Yet the stress of running a company and long working hours means entrepreneurs often find themselves functioning on little sleep. Evanston, Ill. -based sleep expert Dr. Lisa Shives says getting seven to eight hours of sleep a night is a critical component of entrepreneurs' business success. "Sleep affects our executive function; the area of the brain responsible for decision making, creative thinking, memory and reaction time," says Shives. Follow these seven sleep habits and dream your way to business success: 1. 2. 3. 4. 5.
Related: 3 Bad Sleep Habits You Need to Break 6. If you have a hankering for a snack, Shives recommends grabbing a bite containing protein and fat such as yogurt rather than one containing starch or sugar. 7. Related: Debunking 5 Common Myths About Sleep. How Square Earned a $3 Billion Valuation. Three years ago, Twitter co-founder Jack Dorsey started a company called Square to offer business owners a new way to accept payments over mobile devices. This week, after closing a $200 million round of financing, the San Francisco-based company is reportedly valued at $3.25 billion.
It's enormous news for a startup that has grown from about 150 employees a year ago to more than 400 today. Square says it's processing more than $8 billion in payments each year. So how has Square managed it? Here are three strategic choices the young company made that helped put it on its current trajectory: 1. Fulfill a need. Everyone from plumbers to food-truck owners suddenly had a third way to get paid besides cash and check, and customers could use their plastic in more places than ever before.
Related: How 'NFC' and Mobile Wallets Will Change the Way Retailers Do Business 2. In May 2011 it announced two new mobile apps, Card Case and Register. 3. Feeling Down? Here Are 3 Ways to Stay Motivated. Editor's Note: College Treps is a weekly column that puts the spotlight on college and graduate school-based entrepreneurs, as they tackle the tough task of starting up and going to school. Follow their daily struggles and this column on Twitter with the hashtag #CollegeTreps. Saying entrepreneurship is a difficult and lonely road is an understatement. Being a founder of a company can at times seem downright impossible. There are a lot of big no's, people snickering at your ideas and the big tear you let out when you realize 90 percent of first-time startups fail.
Don’t lose hope. There are plenty of ways to stay motivated during this process. Related: What Really Motivates Employees? Here are three things you can do to lift your spirits when you are feeling down: 1. Aside from researching our industries and meeting with mentors, we also had fun. Related: What's the Best Way to Stay Motivated? 2. Besides, who said you can’t have fun and laugh at yourself? 3. How do you stay motivated? How Entrepreneurs Think Differently and You Should Too. Image credit: Shutterstock Entrepreneurs are a curious bunch. They come in all shapes, sizes, genders and backgrounds. They get up at dawn. They're the first ones to the office and the last ones to leave.
At best, they make the rest of us humans wonder if it's worth getting up in the morning. Sound crazy? Beyond the "to do" lists of the most successful ‘treps I know, lies a way of thinking that acts as the engine to their seemingly invincible take on the world. 1. "I keep my childlike wonderment alive. Related: Inside Nerdist's Media Empire for the Internet Age 2. "An entrepreneur's train of thought goes like this: ‘everything around me was invented by someone and that person probably isn't any smarter than I am.' 3. Two things tend to happen: 1) they earn reputations as terrible bosses and 2) their businesses eventually erode because of their own self-fulfilling, pessimistic prophecy. 4. Related: How Happy Are Small-Business Owners?
5. The author is an Entrepreneur contributor.