Ask the Expert series: How to ensure business success

Find out what noted business professionals are talking about on the Web in Slate Magazine's BizBox: Ask the Experts series.

By the time Ryan Allis had reached the age of 21, he had achieved the financial goal most people just dream about: He built his company to one million in sales. Author of the book Zero to One Million, Allis has since grown his company, iContact Corp., a provider of Web-based email marketing and online communication software, to $10 million per year in sales, and has helped numerous clients increase their sales dramatically.

In this online conversation, Allis shares the secrets of his lightning-fast success with you and shows you how you can apply his advice for successfully running your business — from initial planning to managing high-speed growth.

Question: What's the best way to keep your most talented employees when you're strapped for cash?

Ryan Allis: You may wish to consider providing a piece of the pie — some ownership in your company. When we started iContact in 2003 we offered our first employee $1000 per month and 1.5% of the company. We were able to get a great person for very little out-of-pocket expense. I'd also recommending working to consciously build a unique culture — one in which people love going to work everyday. That will be a big added benefit that is often valued more than the cash.

Question: Did you ever have issues getting capital or loans or partners because of your age? What are your recommendations for overcoming age bias for those of us who didn't make our first million by age 18?

Ryan Allis: Yes, we had a very difficult time raising capital initially. We were turned down for a loan from the bank and had to go to our friend of ours for a $5,000 "emergency" loan to cover the net loss we had in the first year in 2003. As a first-time entrepreneur, the best way to overcome age or experience bias is to get results and drive revenue. Revenue will speak for itself regardless of your age. Sell something successfully to somebody and all kinds of people will come out of the woodwork and be willing to provide loans or equity investment for your company. We bootstrapped for 3 years, then raised $500,000 from a local VC firm here in Durham. Then we raised $5.3M in 2007 to accelerate growth even further. While it was hard to raise capital initially, today I get 2 or 3 voicemails per week from private equity investors, venture capitalists, and hedge funds managers.

Question: What is more important? Smarts? Or passion and drive?

Ryan Allis: I think passion, drive, and persistence are most important. There are many, many very successful entrepreneurs who were C-students in school. Intelligence matters — but not necessarily book smarts. Smarts to me is the ABILITY to learn quickly, not necessarily what you already know today.

Question: How would you describe your management style?

Ryan Allis: We like to hire people smarter than us with lots more experience than us in their areas, give them some guidance and training, and then give them the freedom and space to get stuff done and create their own departments. We track metrics via quantitative objectives (QOs) that we track weekly and set every 6 months. I like to "trust but verify." I used to be a micromanager and learned early on that style was often not as effective. 

Here are some tips on being a good manager:
1. Have a Vision and Communicate It.
2. Show Respect.
3. Share Your Success.
4. Don’t Be Too Serious.
5. Work With Your Employees.
6. Have Your Door Open.
7. Listen & Build Relationships.
8. Commend More Than You Criticize.
9. Reward With Praise as Well as Salary.
10. Consciously Build a Culture.

Question: With the recent credit crunch and banking crisis, what's the best way to get start-up capital for launching a new small business today?

Ryan Allis: You can often get a loan if you are willing to secure it with a personal asset (like your house). You can also apply for a loan backed by the Small Business Administration. I encourage early-stage entrepreneurs to figure out how to start selling and gaining revenue by spending as little money as possible. One is often in a much better position to raise capital (both loans and equity capital) once they have $10,000 or $20,000 per month in revenue.

Question: So I have a dream of starting my own business — however my idea is not unique and the market is already saturated— should I just plug ahead on the thought that my idea is better (it is) or should I wait and try to come up with something new?

Ryan Allis: There are some critical questions that you can ask yourself to determine if your idea is a true business opportunity. There were a number of competitors in our space when we started in 2002 doing the same thing, but we were able to position the product well online. We got some initial sales and then used those funds to reinvest in making the product even better, hiring great people, and in customer acquisition.

Question: Are most new small businesses all Web and tech start-ups?

Ryan Allis: No, not at all. Most small businesses are franchises and consulting firms. There are many, many more small businesses that are restaurants, stores, accounting firms, consulting firms, agencies, etc. than there are Web and tech start-ups. Sometimes the tech start-ups get a lot of attention but the large majority of companies that start up today are not selling a technology product.

Question: How do you know you have a rock solid idea for a new business?

Ryan Allis: Talk to people who are likely customers and ask them what they think — rather than just talking to friends, family, and colleagues.

Question: How can you tell a small business will become profitable in the long run?

Ryan Allis: You often cannot. One can only try by creating a "pro-forma" profit and loss projection and trying to estimate revenues and expenses in each category based on the best educated guesses you can make. It can get complex as they are both fixed expenses (overhead) and variable expenses. Mapping these out and then graphing your projected net income and aggregate net income by month will allow you to determine your monthly cash flow breakeven and total breakeven points. One can often test to determine if there is demand for what you are selling with pilots, surveys, and prototypes before launching fully. If you can make a unit economic transaction (one sale of one product) profitable and do that over and over again, you'll have a profitable business.

Question: How do you find really good employees?

Ryan Allis: We use referrals from existing members, word of mouth, LinkedIn, Craigslist, HotJobs, Monster, and CareerBuilder. One has to develop a good filtering process (we use job-specific questionnaires). 

When we are interviewing candidates, we look for people who show they can:
1. Communicate well.
2. Take initiative.
3. Work hard.
4. Learn quickly. We care more about how fast you can learn than how much you know. For senior level positions we also look closely at track record. We look for people who have a demonstrated record of driving projects to successful completion.

Question: I have a provisional patent on a product. How do I get my product to market? How do I find a manufacturer?

Ryan Allis: I would suggest finding individuals who have already produced products similar to yours and asking them whom they used for manufacturing.

Question: Of all the new business ideas you hear ever year... what percentage of them are actually viable? In other words, what's more important... having lots of start-up capital with an okay idea, or a little bit of money and a truly amazing idea?

Ryan Allis: Ideas are a dime a dozen. Execution is what matters. I'd rather invest in a driven, passionate entrepreneur who will stop at absolutely nothing get in his or her way than an individual with a great idea but no drive. 

Between your choices, I'd rather have a little bit of money and a great idea. But more so than either of those, I'd rather have a driven person.

Question: For someone looking for a great idea for a new business — how do you come up with an idea for a business — and how do you know that it will be successful?

Ryan Allis: Here are some tips for coming up with business ideas:
1. Evaluate the products you use everyday. How can they be better? What need or pain do you have that could be fulfilled by a product or service that is not currently being provided?
2. Go to networking events, conferences, and seminars. You may find someone with a good product or a good idea that is looking for partners.
3. Get a job at a company in the industry you are interested in. Work there to get experience and build contacts. Often you will see product ideas in the course of your work that your company will choose not to pursue.
4. Consider starting a franchise with an existing good idea.
5. Find a partner with a business idea that you can join up with and exchange business cards.
6. Connect with engineers and scientists. Look at the tech transfer department at your local universities.

Question: Did you run into any problems getting your business started because of your age?

Ryan Allis: Sure, but there were just as many advantages to being young (such as lower monthly expenses, people being willing to help you) as there were disadvantages (harder to get capital, people not taking you seriously).

Question: Where do I find products to market?

Ryan Allis: Check out product sourcing catalogs. They often have lists of products you can buy at wholesale and then resell via the web, catalog, or stores.

Question: How do I develop a sales plan?

Ryan Allis: Check out more information on building sales and marketing online and offline.
1. How will the product be sold? In a retail store, online, by direct mail, by catalogs, by infomercials, through distributors, or by a combination?
2. Will you sell your product at wholesale, at retail, or both?
3. Is your main market businesses or consumers?
4. Where do customers currently go to look for the product?
5. How can we be positioned so that were in these places?
6. Could the price point support a telesales force?
7. Could the price point support a direct sales force?
8. What is my unique selling proposition? What will make my product so different that customers will buy it rather than competing products?

Question: What is your number one tip for a budding entrepreneur?

Ryan Allis: Take action today.

-Slate, 2008