Winning Tips for New Entrepreneur

When Andrew Yang launched Manhattan GMAT, a standardized-test preparatory service, he wanted to differentiate himself by snaring experienced instructors who themselves had scored above 700 (out of a possible 800) on the test. The Princeton Review and Kaplan require their coaches to crack just 680 or better. "The test-preparation market is totally unregulated, so there are lots of outfits who cut corners and employ subpar people," says Yang.

Drumming up talent was easy work in New York, home to throngs of sharp banker types, but not so easy elsewhere. Finding a fitting instructor in Austin, Texas, took 18 months; he's been searching Miami now for two years--still nothing. Even those that clear the scoring threshold have to survive a phone interview and a mock GMAT lesson via Web video. The half that hang on get a flight to New York, where Yang puts them through additional hours of mock lessons. One candidate with instruction experience, an MIT undergraduate degree and a nearly perfect GMAT score was still sent packing. "We badly wanted to like this guy," recalls Yang, "but he just wasn't right."

Sticking to core strengths is important for any company, and even more so for young outfits looking to establish an identity and, with any luck, to grow like gangbusters. For Yang, being persnickety has its perks: Manhattan GMAT is on track to pull in $12 million in sales this year, double its 2007 figure. "Once you make an impression in a market, you're done," he says "So you have to make sure you nail it."

There's no one set of rules for taking a small business to the next level. Growth brings change, and the bigger a company grows the more complex its challenges become. A start-up with $100,000 in revenue trying to get to $1 million faces different operational, financial and human-resources issues than a $5 million outfit stretching to hit $20 million.

With that in mind, here are some tips for navigating growth at five crucial stages in a young company's development. For the full list, see our slide show.

Getting From Zero to $500,000 In Annual Revenue

Befriend Bankers (you're going to need them). Even if your capital needs are modest, now's the time to start courting future financiers. Those relationships come in handy in a credit crunch. David Guernsey, chief executive of Guernsey Office Products in Chantilly, Va., and vice chairman of Virginia Commerce Bank, says bankers look for the three C's: collateral, competence and character. In this environment, spreadsheets alone don't cut it. "Bankers can't [measure] competence or character if they don't know you," he says.

Poach old phone numbers. Businesses fail all the time. But why let all those good customers go to waste? Open up a phone book, page to the section on your industry, and start dialing. Disconnected numbers likely mean the outfit went belly up. When you find one, call the phone company and pay to have that number redirected to you. Just tell callers that the old business has shut its doors but, of course, you would be very happy to help them. "Those numbers are likely still drawing a lot of calls," says Mike Michalowicz, author of the Toilet Paper Entrepreneur. "Get them and you get a cheap surge of qualified prospects."

Getting From $500,000 to $1 million

Keep proving the market. Loading up the payroll at the first nibble of demand can be a mistake, says Gregg Weiss, founder of IPhoneAppQuotes.com. Weiss' company connects mobile software application programmers with companies looking for apps. At first he collected the leads himself and passed them off to developers via e-mail. Within eight weeks, he was drawing 300 leads per month. That became too much to handle, so he hired a programmer to automate distribution. His business leaped forward again, and again he waited as long as possible before bringing on employee No. 3 to handle demand for Android and BlackBerry application quotes. "Scaling up every aspect of your business is paramount," says Weiss. "You have to recognize the need, yet be careful not to waste money when you don't have to."

Pay yourself as little as possible. At this stage, capital is better put back into the business than into your pocket, says Gary Vaynerchuk, author of Crush It! Why Now is the Time to Cash in on your Passion. Vaynerchuk took that lesson to heart. Between 1998 and 2000, his retail wine business, WineLibrary.com, grew eightfold to $25 million. His annual salary during that period: $27,000. "We made a massive commitment to growth," he says. "We wanted that money to hire new employees--most of whom we were paying more than ourselves."

Getting From $1 million to $5 million

Rethink all assumptions. YuChiang Cheng, founder of World Golf Tour, assumed his online golf game and Web site would be mobbed by the gamer crowd when it opened in 2008, and planned his marketing and advertising accordingly. What he quickly found through surveys, however, was that his typical visitor wasn't a traditional gamer at all--instead, he was drawing pure golf enthusiasts, many of whom had never played video games. Cheng responded by making his game as realistic as possible to appeal to real golfers (rather than adding gratuitously hyperbolic features, like power-boosted swings and such, that would appeal to hardcore gamers). He now boasts more than 1 million players in 180 countries.

Maintain a personal touch. Jeff Morin started selling coins at age 19. While his Coins For Anything has blossomed into a $2.8 million (sales) business, Morin has hewed to one premise: Deliver something a little extra and you'll have a customer--and advocate--for life. Short and simple handwritten thank-yous work well. "It doesn't sound like much," says Morin, "but when's the last time you got a thank you for buying something--a handwritten thank you? It shows how much you value the business."

Getting From $5 million to $10 million

Master the soft sell. Intoxicating as rapid growth is, don't let the urge to sell to everyone, everywhere, every time get the best of you. Stan Steinreich, founder of Steinreich Communications, says 90% of his company's $10 million in revenue comes through networking and word of mouth--but that doesn't mean barging into a room and shaking as many hands as possible. "The over-aggressive guys are quickly labeled as creepy," says Steinreich. The best strategy: Let prospects do the most of the talking, and sprinkle in bits of relevant advice every so often. If they liked what you had to say, you'll hear back. "Very few people listen to anybody," adds Steinreich. "They just talk." (For more, check out "Learning The Art Of Listening" and "How To Get In Good With Customers.")

Build an advisory board. Advisers are critical to growth, not only for their business acumen but for their contacts with other companies, vendors, clients and industry professionals. Advisers also add a whiff of legitimacy. "Most investors will say they will invest in a B-class idea with an A-class team over an A-idea with a B-team," says Partrick Ennis, managing director at early-stage investing firm ARCH Venture Partners. For more, check out "How To Set Up An Advisory Board." Do not confuse advisory boards with boards of directors, which may be more trouble than they're worth--see "The Case For Not Having A Board."

$10 million and Beyond

Craft smart incentives. Rah-rah speeches will only get you so far with employees. At some point, they want to be compensated for their hard work--even if that means not taking home fatter salaries. I Love Rewards! (sales: $12 million), which manages incentive programs, eats its own cooking. Founder and CEO Razor Suleman awards cost-conscious employees by paying them 10% of any savings they generate, be it through renegotiating a vendor contract or some new operational efficiency. The program saved $263,000 last year--which works out to a 10% return on investment, crows Suleman.

Trust the process, not your gut. Les McCown, chief executive of Predictable Success, a business consultancy, likes to say that getting to the $10 million mark is "fun." Beyond it is "whitewater," when decisions rush at a furious pace and an owner's intuition no longer enough. At this point, companies need established processes, for managing, hiring, customer service, the works. Without them, owners don't have time to plan for the future--and that's when growth grinds to a halt.

Source:http://in.news.yahoo.com/240/20091110/1301/twl-7092937.html