From the category archives:

Startups

Three Killer Businesses That I Want(ed) To Start

by Ryan on November 23, 2010

Good Business Photo

I’m a big advocate of telling anyone and everyone my ideas. I believe strongly that the entrepreneur who’s afraid to share his / her idea, ultimately goes no where. Seriously, when was the last time you met someone successful that had a good business idea but was unwilling to share it?

Following in the tradition to share my business ideas and seek feedback, I’m going to throw out 3 business ideas (admittedly somewhat “half-baked”) that I’ve thought of over the past fews years but been too busy to execute on because I’m busy with my stock music and sound effects business, AudioMicro. If you would be so kind as to leave your opinion on each of the 3 ideas in the comments, I would greatly appreciate it. Without further adue, here are the 3 ideas…

1. Celebrity Groupon – once a week, a celebrity goes up for auction. Fans each buy “tickets” (say for example, $100 each) and only when the total tickets sold reaches a milestone (e.g. 5,000 tickets or $500k) the celebrity agrees to attend a private event / party for the 5,000 “celebrity groupon” ticket holders. 50% of the proceeds go to us (i.e. Celebrity Groupon), 25% goes to a charity of the celeb’s choice, and 25% goes into the celebrity’s own pocket.  If the milestone to unlock the groupon is not met, the “fans” are simply refunded their money.  Out of our 50% rake, we pay for the costs of putting on the event – venue, security, etc.  Annual revenues of this company could easily reach $2M per month or $24M per year within year one.  The biggest issue I can see with this idea is that the celebrity may be unwilling to share how much they charge for a personal appearance.  To work around this, I suppose that we could always disguise the total number of actual tickets sold / needed to unlock the Groupon.  This model would also work well in attracting rock bands and other musicians to play private concerts.  Fans would have to pay for their own travel and accommodations to attend the actual “celebrity groupon” event.  We could ultimately even up-sell merchandise, hotel, and other travel arrangements to the fans.

Credit to Mike Bracco and Norm’s for helping to formulate this idea.

2. Ad Network for Commuter Vehicles – Inspired by sitting in traffic on the 101 and staring at the backs of cars, I wondered “why not stare at an advertisement instead of a blank bumper?”. In short, the clients of this business would be large outdoor advertisers and they would place massive ad buys to places ads onto the backs of 100+ vehicles in a particular zip code all at once.  Big brands would pay us to have ads run on the backs of commuter vehicles. E.g. $200 per month per car.  The ad network (us) would take 50% and the commuter would get 50%.  We would only accept commuters with cars that are new (e.g. leased within the past 3 years) and drivers with good driving records.  The ads get “wrapped” on the cars and all commuters are screened for good driving records and proper insurance coverage.  If you’re not familiar with car wrapping, the following photo says it all:

Wrapped car Pictures, Images and Photos

The reason this business is different from just the “wrapping” business is that we would be creating a massive ad network for big brands to get their products onto the backs of thousands of commuter vehicles in a particular location all at once, rather than a one off car owner deciding to wrap his own car with an ad for his own “dog watching” business as in the image above.  Imagine driving past 50 cars (all being paid $100 per month per car) on your way to work all with Coca-Cola ads on the back?  Wouldn’t that likely compel you to purchase a Coke (versus a Pepsi) at lunch?

NOTE:  There’s actually a company in LA doing this.  They are headed by one of my favorite new LA entrepreneurs, Jeff Blake. Check them out at Altavert.com

3.  Lockboxes for Everyone – don’t you hate getting checks and having to drive to the bank to deposit them?  What if you could 1.  mail your checks to the bank or 2.  have the people who owe you money mail the checks directly to your bank?  The bank would then scan and deposit your check and place it into your account for you saving you the hassle of every having to go to a bank or ATM to deposit your checks.  Businesses all around America have this service already and it’s called a “Lockbox“.  The banks provide it to them for free because of the high volumes of checks they receive on a daily basis.  So what if we started a company that provided “Lockboxes for Everyday People”.  Once the business reached scales – i.e. $100M in daily deposits, we’d have a pretty serious business on our hands – better known as a bank!  Now I know that Chase and PayPal already let you take a photo of your check on an iPhone and deposit it but what about all the other banks out there are folks that don’t have an iPhone or know about the app?  Lockboxes for everyone s0lves this problem.

4.  BONUS – here’s 4 more businesses that are certainly not original ideas but that would likely succeed if executed in a new market, perhaps a small town like Nashville, where I grew up:

– A Burrito chain like Chipotle, Willy’s, or Moe’s – these places are gold mines!

– A Yogurt chain like Menchies, Pinkberry, or Red Mango

– A “choose your own” salad place in Nashville – like one of those salad stations that are everywhere in NYC, including deli’s

– An indoor digital ad display network (like those TV’s you see with constantly rotating ads)

The reason I’m sharing all of these ideas here is because I profoundly believe that ideas are a dime a dozen.  Execution is everything in the business world.  Your idea will never take shape and evolve into an executable business unless you are willing to share it with friends, mentors, colleagues, co-workers, family, investors, and most importantly, customers.  If you want to get anywhere, don’t be afraid to talk about your business and share your ideas.

So what do you think of these business ideas?  Have some business ideas of your own to share?  Please email them over to me or feel free to discuss openly in the comments below.

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The Emory U Lecture – Every Business School Needs an Internet Marketing Course

by Ryan on October 7, 2010

On Monday, I had the privilege of guest lecturing in two entrepreneurship classes at Emory University’s Goizeuta Business School. Here’s video from the first lecture.  It’s about 1 hour and 20 minutes.  Please pardon the funky camera angle…

And if you’re still awake, here is the video from the first 30 minutes of the 2nd lecture, before the camera ran out of battery life…

During the 2 classes, when I polled the audience, here’s a run down of what they wanted to learn more about:

1.  Adwords / Paid Search – How’s it work?

2.  Monetizing a site with Ads, is tough, what other ways are there to monetize?

3.  How do you come up with good ideas?

4.  How to gain technical expertise – e.g. how the internet, search, and websites work?

5.  Social Me Me Media!  How do you use it to your advantage?

6.  How has a background in accounting helped?

7.  How to get started with a business.  What are the first steps?

8.  How can you attract customers and content providers?

9.  How much does it cost to make an iPhone app?

10.  How to keep content providers happy in the early stages of a business?

What stuck out the most from the experience was how interested the students are in learning about “How to Get Website Traffic“, a topic which I’ve blogged about here before.  This leaded me to believe that every business school should have a class on internet marketing, as an overwhelming majority of the discussion became geared towards paid search, organic SEO, and social media.

Another interesting discovery occurred when I asked the class “How many of you are on Twitter?“, to which only 1 student out of a classroom of around 40, raised their hand.  I’m not sure whether this indicates that Twitter has either (A) a lot of room to grow or (B) it’s peaked. I’m inclined to vote for (B).  When I asked the class “How many of you are on Facebook?”, the entire room nodded in acknowledgement.

During the discussion I provided a list of free resources to help get them started, including TechCrunch, This Week In, and my favorite entrepreneurial / VC blog, BothSidesOfTheTable.

Since the lecture, I’ve had a number of students follow up with me seeking advice.  I’m very excited by the opportunity to give back to the community by helping them get their businesses off the ground and on the right track. Thanks to Andrea Hershatter for allowing me the opportunity to speak to her class.  I am truly honored to have been a part of their business school experience.  It’s the least that I could do to give back the the institution that has help me so much in my own career.

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Back of the Envelope: How to Estimate the Annual Revenues of Any Private Company

by Ryan on September 15, 2010

estimate revenue

Have you ever wondered how much money a particular company makes? Perhaps you just wanted to know their annual sales?   The only problem was, the company was small (i.e. not publicly traded) so there’s no public financial information available on them.   So how do you calculate their revenues?

I created a simple, back of the envelope (i.e. quick and dirty), mathematical calculation that accurately estimates the revenue of pretty much any public / private company, large or small. It’s certainly possible that I’m not the first to come up with this calc, but for now, I’ll take the credit for it. Here’s how it works:

ANNUAL REVENUE = NUMBER OF EMPLOYEES X $100,000

That’s it!  It’s that simple.  Now let me briefly explain the logic behind this one.  The average American makes a little over $40,000 per year.  The costs of an employee to an employer is about 1.25x their base salary.  The additional 25% comes from payroll taxes, health insurance, worker’s comp insurance, office space for them to sit in, etc.  Therefore, the employer must bring in $50,000 ($40,000 x 1.25) for every employee in the company.  Because most companies have a gross profit of 50% or so, this means that in order to stay in business, the average company must have $100,000 in revenue for every employee in their company (($100k x 50%) – $50k) = $0 or Break Even).  The companies with more than $100k in sales per employee are more profitable (e.g. GOOG) than those that don’t (e.g. pretty much every startup company on the planet that takes VC / Angel money).

We so often hear about how well a company is doing based on their press releases, speaking engagements by their founders, etc.; however, no one ever wants to tell you exactly how much money their company makes. The next time you want to know how much revenue someone’s company is doing, don’t just ask them point blank. Instead, simply ask them how many employees they have. Every CEO will tell you how many employees they have. If they won’t tell you, just ask one of their employees how many people work in the company.  Once you have that number, simply multiply it by $100k, and you now have a quick and dirty (and in my experience, highly accurate) estimate of their annual sales.

A word of caution on startups…If the company is a startup, you can pretty much rest assured that they are doing way less than $100k per employee.  For now, assuming the company has a business model where they actually sell something), take their number of employees and multiply by $50k instead of $100k to arrive at the annual revenue estimate.  In a later post, I’ll explain how you can more accurately nail down the exact revenues of a cash burning startup. In addition, I plan to explain how to accurately estimate a startup’s market cap (i.e. how much the company is worth) in a calculation just as simple as the one you’ve read about here today.

UPDATE: I’ve been reading in the comments about how the calc needs to be adjusted upwards / downwards depending on the industry (Duh!  It’s a “back of the envelope” ESTIMATE, hence the title of this post!).  Therefore, I’ve come up with a simple adjustment such that it works for nearly any industry.  The revised formula is  as follows:

ANNUAL REVENUE = NUMBER OF EMPLOYEES X AVERAGE SALARY OF AN EMPLOYEE IN YOUR INDUSTRY X 2.5

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