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BOOTSTRAP INTELLIGENCE
WEEK 4 : FEB. 9 MBAX 6860 : Bootstrap Tactics for Entrepreneurs BOOTSTRAP INTELLIGENCE February 9, 2007 BOOTSTRAP
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OVERVIEW Competitive intelligence
What it is What it is not Key bootstrap market research to perform How the heck do I uncover needed information? Bootstrap equity detailed discussion My take on it… Consulting / Resource forum February 9, 2007 BOOTSTRAP
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WHAT CI IS NOT… Spying A crystal ball Database search Paper
A job for 1, smart person Software A news story A spreadsheet February 9, 2007 BOOTSTRAP
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WHAT CI IS… Information for decision-making Early-warning tool
Assessment Many flavors Improve bottom line A way of life, a process Part of best-in-class co’s Exec driven External focus Short & long term February 9, 2007 BOOTSTRAP
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BOOTSTRAP RESEARCH Market/industry size Market segmentation
Revenue basis and/or total # of potential customers – domestic & international Market segmentation Break down into manageable/target segments Growth rate Know for decision-making as well as selling vision to bankers, investors, employees, etc. February 9, 2007 BOOTSTRAP
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BOOTSTRAP RESEARCH Competition Trends Customers Know ‘em!
Maintain pulse on industry/market Customers Most important! Obvious, but…. Talk to potential customers and LISTEN and LEARN! February 9, 2007 BOOTSTRAP
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BOOTSTRAP RESEARCH SOOOO…how do you secure this information? People!
Sales personnel Trade groups and associations Technical groups and forums Trade shows and conferences Partners and affiliates Analysts Competitor’s and competitor's customers Industry publications February 9, 2007 BOOTSTRAP
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BOOTSTRAP RESEARCH Internet Trade associations Industry publications
Company websites, 10K’s, search engines Trade associations Industry publications Wall St. analysts Databases – Lexis/Nexis, ABI, etc. (Leeds library resources) February 9, 2007 BOOTSTRAP
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ADDITIONAL RESOURCES The CI Resource Index
Bizminer Industry Analysis & Trends InvisibleWeb.com Databases, archives, & search engines TSCentral.com Directory of trade-shows MarketResearch.com Society of CI Professionals February 9, 2007 BOOTSTRAP
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MY TAKE ON IT… CALL PEOPLE!!!! Associations Industry publications
Competitive companies Benchmarking February 9, 2007 BOOTSTRAP
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TEAM COMPENSATION Work for hire Salaries Stock Stock options
Payment as a independent contractor for specified work Salaries Ongoing payments for doing a job Deferred salaries Stock Grants of stock for work performed Stock options Options to purchase stock for work performed February 9, 2007 BOOTSTRAP
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WORK FOR HIRE Advantages Disadvantages
Flexible; best suited for project work Easy to start and stop Avoid many employment law issues Disadvantages Must conform to employment law for independent contractors Not suitable for ongoing management work Can be expensive February 9, 2007 BOOTSTRAP
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SALARIES Advantages Disadvantages Provide steady income to founders
Protection and benefits of employment law Workers comp, social security, etc. Disadvantages Significant cash flow or cash resources required Setting up payroll is cumbersome Employment laws can be restrictive More difficult to terminate or start/stop employment February 9, 2007 BOOTSTRAP
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STOCK DISTRIBUTIONS Provide stock in lieu of cash payments Advantages
Give founders an increased stake in company Do not diminish cash resources Disadvantages Dilute ownership of investors Change balance of ownership and governance Must pay taxes on value of stock ( ! ) February 9, 2007 BOOTSTRAP
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STOCK OPTIONS Provide right or option to purchase stock at some future time Advantages Avoid immediate tax liabilities Provide incentives to make company successful Motivates! Do not diminish cash resources Disadvantages Change ownership structure of company (long term) Tax consequences when options are exercised February 9, 2007 BOOTSTRAP
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TYPES OF OPTIONS Incentive Stock Options Employee Stock Purchase Plans
Generally used for ongoing companies Many mandated restrictions; some tax advantages Employee Stock Purchase Plans For ongoing companies to incent workers Not appropriate for start-ups Nonqualified (Nonstatutory) Stock Options Best suited for startups February 9, 2007 BOOTSTRAP
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NONQUALIFIED OPTIONS No limit on number of options granted
No qualification rules regarding who gets options Employees, investors, advisors, contractors, etc. Option exercise price can be any amount (1¢) No tax liability upon grant of option (unless the option has a “readily ascertainable” market value) Taxed as ordinary income based on fair market value at time of exercise February 9, 2007 BOOTSTRAP
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KEY EQUITY POINTS FOR BOOTSTRAPPERS
Know difference between stock distribution and option granting Tax, valuation, incentive Authorize appropriate # of shares Ex = 10,000,000 Maintain diligent record of equity – both stock distribution and option grants Run exercise scenarios February 9, 2007 BOOTSTRAP
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KEY EQUITY POINTS FOR BOOTSTRAPPERS
Create an equity plan right from the beginning Ownership structure, present & future Executives offered X% shares, mgrs X%… Fair and consistent – just like any other form of compensation Know and present exit options to equity stakeholders Acquisition, go public, merger, buyback…”how are these things going to be worth anything?” February 9, 2007 BOOTSTRAP
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STEP-BY-STEP Authorize shares – Articles of Inc./LLC
Create equity plan Create template for stock distributions and stock options Company letterhead Boiler-plate language – make look sexy Signed/authorized by CEO and Treasurer Notarized February 9, 2007 BOOTSTRAP
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STEP-BY-STEP Determine exercise price Complete option grant document
Balance btwn incentive and cash flow to co. Determined by stage of company Complete option grant document Record in equity log Continuously monitor equity log Manage to this amazing incentive February 9, 2007 BOOTSTRAP
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EQUITY PITFALLS Handing out options to everyone and anyone with no plan Does not incent, you look bush league Not having a good story for how options will be worth something Not proactively managing the status Forgetting to manage to them February 9, 2007 BOOTSTRAP
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MY TAKE ON IT… Team compensation Stock options
It depends…resources available, desire of adding team member, new team member’s flexibility Overall…options are a GREAT compensation tool Motivates, no cash hit, favorable tax Think of cash flow! Stock options Great tool! Nonqualified February 9, 2007 BOOTSTRAP
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WEEK 5 Bootstrap Marketing All tasks to be reviewed by next week
Speaker = Mark Mitchell All tasks to be reviewed by next week Tasks to complete: Readings Research Competitive Intelligence February 9, 2007 BOOTSTRAP
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“Whatever you are, be a good one.”
--Abraham Lincoln February 9, 2007 BOOTSTRAP
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