1. Welcome to Issue Eight
2. 100 Steps to Building a Company to $1 Million in Sales
3. Choice of Business Entity
4. $50,000 Needed for Youth Entrepreneurship in Southern California
5. Free Content for Your Web Site
6. Closing Notes

In this month's issue we have a featured excerpt from Zero to One Million, 100 Steps to Building a Company to $1 Million in Sales and an article from Hutchison & Mason, PLLC on selecting a corporate entity. I hope you enjoy them!

If you have any comments, suggestions, or would like to contribute content to be published in the newsletter or online, I encourage you to contact me at ryan@zeromillion.com. Please do feel free to forward this newsletter on to your colleagues and associates. On behalf of the Zeromillion.com team I thank you for being a subscriber.

Yours entrepreneurially,

Ryan P. M. Allis, founder
http://www.zeromillion.com
The Top Entrepreneurship Resource Online

100 Steps to Building a Company to $1MM in Sales
by Ryan P. M. Allis

Throughout my recently released book Zero to One Million, I provide step-by-step instructions for starting, growing, and managing a business. In the below excerpt from the book I provide 100 steps for building a company to $1 million in sales. While these steps surely cannot capture everything that is needed, they are a good start for an aspiring entrepreneur. Do note that the steps may not be in the exact order and may not apply to every type of business. The steps are customized for the business that is developing a product that will sell initially directly to consumers or directly to businesses and do not have a lot of money initially to spend on paid advertising. The general order remains, however, and the majority of steps will likely apply to your business.

1. Come up with a business idea or partner with someone with an idea.
2. Determine what you will sell—your revenue models.
3. Use the MAR opportunity evaluation model to evaluate that idea.
4. Research suppliers of your product
5. Complete market research and evaluate whether your idea will succeed in the marketplace.
6. Come up with a name for your company.
7. Write your business plan.
8. Complete your pro forma income statement.
9. Determine how much you’ll need to raise to get your business to cash flow positive—the point where you are making more than you are spending.
10. Get feedback on and improve your business plan. Go to your local chapter of the Service Corps of Retired Executives and review your plan with them.
11. Determine your financing strategy.
12. Determine who will own what percent of the company and discuss if you wish to use vesting (granting equity to initial founders over time based on how long they stay with the company and what they do).
13. File your articles or certificate of incorporation with your Secretary of State. Incorporate as an S or C corporation if in the United States. Incorporate as a C corporation if you wish to raise investment or sell the company one day. Incorporate online or through your law firm.
14. Obtain an Employer Identification Number (EIN) from the Internal Revenue Service so you can open a bank account and hire employees.
15. File form 2553 with the Internal Revenue Service if you intend to be an S corporation.
16. Have your law firm create non-disclosure, non-compete, and confidentiality agreements and have all involved with your company sign them.
17. Hold your initial board meeting and sign the Organizational Consent document.
18. Decide if you want to have a stock options plan and create an options pool.
19. If you decide to do vesting, have your law firm write a stock restriction agreement, have all involved in your company sign a copy, and then have each person consider filing an 83(b) election if in the United States.
20. Issue your stock certificates.
21. Have your law firm draft consulting agreements for any independent contractors and employment agreements for any employees.
22. Sign these agreements.
23. Open and fund a bank account and order checks.
24. If you decide you’ll need to raise money, look into the different sources of money, including debt capital from family, friends, or the bank or equity capital from accredited private investors or venture capital firms. If you think you can start out small, bootstrap, and grow organically from revenues, evaluate whether you wish to grow your company in this manner.
25. If you decide you’ll need to raise the money from private investors, have your law firm create a private placement memorandum and work with you to refine your business plan.
26. Raise the money you will need.
27. Purchase small business accounting software such as QuickBooks and keep track of all expenses and revenue, or hire an accounting firm to take care of this for you. You also may wish to outsource your payroll.
28. Come up with the name for your product(s).
29. Trademark the names of all your product(s).
30. Trademark the name of your company.
31. Develop your product(s), if you will be selling a product. Ask for quotes from different suppliers.
32. Have a logo created.
33. Either purchase or lease office space.
34. Furnish your office with desks, chairs, couches, filing cabinets, and light fixtures.
35. Purchase needed office supplies such as computers, laser printers, desk blotters, pens, paper cutters, shredders, staplers, staples, paper clips, pen holders, envelopes, and stamps.
36. Purchase any software you will need.
37. Call your phone company and have them install a phone line or purchase a VOIP system.
38. Purchase regular phones or install a digital phone system.
39. Obtain broadband internet access and a wireless router and set up a wireless office network.
40. Decide what roles you need additional help in and can afford to pay someone to fill, then hire those persons.
41. Obtain insurance for your business.
42. Have business cards made.
43. Have letterhead made.
44. Have a brochure made.
45. Design the packaging and labeling for your products.
46. Have your labeling reviewed by your lawyer.
47. Print enough labels and packaging for your initial production run.
48. Obtain a Universal Product Code (UPC) bar code if you will be selling your product in stores or to retailers.
49. Order an initial inventory of products.
50. Have professional pictures of your product(s) completed.
51. Register the domain name for your company site, product site(s), and informational site(s).
52. Obtain hosting for your web sites.
53. Establish a free account with a dynamic DNS service such as Sitelutions to make it quick to switch hosts in case a host goes down.
54. Design your company web site.
55. Make sure you have log analysis software installed on your site and check your visitor count and traffic details often.
56. Add sales copy to your web site that is written to first attract attention, generate interest, establish credibility, create desire, and provoke action.
57. Install a shopping cart on your web site.
58. Apply for a merchant account so you can accept credit cards on your web site and in your business or sign up with a service such as PayPal or ClickBank.
59. If you are a service based company, and will be paid via checks, there will be no need to apply for a merchant account. Start doing business right away, making sure to always leave extra business cards with clients in order to leverage word of mouth. You may also want to purchase an ad in the local phone book.
60. Sign up to an email list management service such as IntelliContact Pro and add a newsletter sign up form to your web site.
61. Sign up for an autoresponder service and add an eight day informational ecourse in order to generate leads, build trust with customers, and recommend your product.
62. If you sell a product nationally or internationally, and not just locally, build an informational web site at a domain with your target keywords separated by hyphens.
63. Add content to your informational web site. Ask others for permission to syndicate their content and write a few articles yourself to start to portray yourself as an expert in your industry.
64. Optimize the informational web site for the search engines.
65. Build a few hundred links to your informational web site.
66. Add a discussion forum to your informational site.
67. Wait 12 weeks for your informational site to be in the top of the search engines for your targeted keywords.
68. Once the merchant account is approved, obtain a gateway such as VeriSign or Authorize.Net and sync your shopping cart or point of sale terminal with it.
69. Install an autobill/continuity program and integrate it with your merchant account, shopping cart, and affiliate program. Decide on what type of incentive you will give to those who sign up for the autobill program.
70. Decide what your money back guarantee will be.
71. Decide what you will charge for shipping.
72. Start selling!
73. Sign up for a live person chat so customers on your site can chat with your customer support team.
74. Consider starting a contest/sweepstakes for your product in order to obtain additional prospect data and leads.
75. Investigate regulatory issues in other countries and determine which countries you can export your product to.
76. If you are selling a product, hire someone to fulfill orders or use a fulfillment house. Establish relations with local media.
77. Write and mail out a press release to local newspaper, radio, and television media or hire a public relations firm to handle this for you.
78. While you are waiting for the search engines to update their rankings, purchase affiliate program software.
79. Install your affiliate program and decide what commissions you will pay on referred sales.
80. Go through the search engines and trade journals to find potential affiliates.
81. Contact the potential affiliates in person or via phone, mail, or email.
82. Build a few hundred affiliates that promote your product(s) for a percentage of each sale.
83. Start sending out a monthly email newsletter to those who signed up on your web site and to your customers.
84. Mail the commission checks to your affiliates each month.
85. Follow-up with your customers once per month to ask how they are doing with your product.
86. Ask for and add testimonials to your web site and marketing materials.
87. Look into upcoming trade shows and attend them.
88. Keep close watch on the search engines. As soon as your informational site is in the top position for your targeted keywords, add a popup to promote your ecourse and your newsletter. Add in recommendations for your product to bring persons over to your product/company site.
89. Once you have some data on your visitor to sale conversion rate and the amount affiliates are paid per visitor sent to your site, work on building joint ventures and strategic alliances with larger partners.
90. Consider establishing a wholesale price for your product and looking for distributors of it.
91. If you decide to offer your product via stores, design and create point of sale items such as a display case and print collateral.
92. Take a look at the operations of your company and see what areas you can make things more automated or more efficient.
93. Bring on a bookkeeper to handle your accounting work for you if you have not already.
94. You may wish to create an employee benefits program if you have not already, to ensure you retain your most valuable workers.
95. Write a company handbook and begin to establish formal systems and processes. Make things efficient and try not to overload workers with forms and red tape.
96. Once you become cash flow positive, look into paying for cost per click, newsletter co-registration, print, radio, or television advertising or advertising via direct mail. Keep a close watch on return on investment at all times.
97. Look into sponsoring athletes or related events or providing your product to high profile persons free of charge.
98. If your product(s) fit the proper criteria, look into creating an infomercial to promote them.
99. Allocate some funding for research and development and attempt to develop additional products.
100. Once you have obtained a top ranking in the search engines, built a solid team and efficient systems and processes, automated operations as much as possible, built a thousand or so affiliates who are incented to sell your product, opened your sales channel up to international markets, and started selling to larger and larger distributors you should be well on your way to one million dollars in sales. Congratulations!

---

Ryan Allis, is the CEO of Broadwick Corporation, a provider of permission-based email marketing and list management software IntelliContact Pro and CEO of Virante, Inc. a Chapel Hill, North Carolina based web marketing consulting firm. Ryan, who is 19, is on leave for a year from the University of North Carolina at Chapel Hill, where he is an economics major and Blanchard Scholar. Additional information on the author can be found at www.ryanallis.com.

This article may be republished online as long as the byline remains.

Choice of Business Entity

Choice of Entity
by Hutchison & Mason, PPLC

When an entrepreneur decides to realize his or her dream of starting a company, one of the first questions that they typically ask their legal counsel is which type of legal entity to select for their business. In most cases, the answer to this question is a Delaware “C” corporation, particularly if the entrepreneur plans to raise venture capital to fund the business. This article will discuss the most common types of legal entities and explain why this conclusion is usually reached.

The most common types of legal entities through which a business can operate are corporations (both “C” and “S” corporations), general partnerships, limited partnerships, and limited liability companies (“LLCs”). The designation of a corporation as a “C” or an “S” corporation refers to the subchapter of the Internal Revenue Code under which the corporation is formed. The two most significant factors that affect the choice of entity are limitation of liability for the owners of the entity and the tax treatment of the earnings of the business at the entity level and the owner level.

The owners of the entity, whether they are founders, investors, or employees, generally desire to insulate themselves from personal liability for the obligations of the entity. All of the entities mentioned above except general partnerships provide some degree of limited liability for their owners. Under state partnership law, all of the partners of a general partnership are personally liable for the obligations of the general partnership. Limited partnerships provide limited liability for the limited partners, but not for the general partners. As a result, general partnerships and limited partnerships are not acceptable entities for venture-backed businesses.

Generally, the owners of corporations (both “C” and “S” corporations) and LLCs will not have personal liability for the obligations of the entity itself. There are certain judicially created and statutory exceptions to this general rule. For example, if the entity is not properly formed and operated and the legal formalities of the entity are not followed, a court may pierce the corporate veil and hold the owners liable for the obligations of the entity. Also, the owners of the entity may have personal liability in certain cases that relate to environmental and products liability.

“C” corporations are subject to double taxation. The corporation itself must pay federal and state income tax on its profits. Then, after these profits are distributed as dividends to the corporation’s stockholders, each stockholder must pay income taxes on his or her share of those dividends. Since the corporation cannot claim a deduction for the distribution of dividends, there is no way to lessen the impact of this double tax.

Generally, limited partnerships, general partnerships, “S” corporations, and LLCs are all treated as pass-through entities for federal and state income tax purposes. As a result, none of these entities are subject to federal or state income tax at the entity level. Under the Internal Revenue Code or the North Carolina tax laws, there is no partnership income tax, “S” corporation income tax, or LLC income tax. Rather, the taxable income or loss of these entities is passed through to the owners. This pass-through effect potentially could provide numerous benefits to investors including: (a) the ability to pass through to investors tax deductions and losses that are typically generated by early stage companies; (b) the ability of investors to increase their tax basis in their investment through retained earnings as the business becomes profitable; and (c) the distribution of earnings to investors without incurring a tax on those earnings at the entity level. However, if a pass-through entity is generating net income on which its owners must pay taxes, the entity must be able to make cash distributions to the owners so that they have will have funds to pay their tax liabilities.

Notwithstanding the significant tax benefits of these pass-through entities, most venture-backed entities are organized as “C” corporations. The reason is that most venture funds cannot invest in pass-through entities under the terms of their investment documents. Most venture funds receive a significant amount of their funding from tax-exempt organizations such as pension funds. Pension funds and similar organizations are exempt from taxation on dividends and capital gains that they receive, but not on pass-through income. As a result, most venture funds are prohibited from investing in pass-through entities.

In addition to being a pass-through entity for tax purposes, “S” corporations are subject to several other limitations that make them unattractive entities for venture-backed companies. Among these restrictions are that: (a) “S” corporations can generally have only individuals as stockholders; (b) “S” corporations can only have a single class of stock; and (c) “S” corporations can only have 75 stockholders.

Once the decision has been made that the “C” corporation is the entity of choice for the new company, the next question is in which state to incorporate. Each state has its own corporate code. While several national bar organizations have developed a model corporate code that many states have adopted to some extent, there are significant differences in the corporate codes of each state. Among the factors that should be considered in selecting the state of incorporation are: (a) the depth and predictability of the state’s corporate law and court system; (b) the nature and extent of the protection that the state’s corporate law affords to officers and directors of the corporation; (c) the flexibility and ease of use of the state’s corporate code; (d) the state’s incorporation fees and annual franchise taxes; and (e) the efficiency and service of the state’s corporation agency. Most corporate attorneys agree that Delaware comes out ahead of all the other states in an analysis of each of the foregoing factors. In addition, most corporate attorneys are very familiar with Delaware corporate law. Therefore, if the investor is represented by out of state counsel, that attorney will probably already be familiar with Delaware corporate law, thus avoiding the necessity of educating the attorney on the nuances of the corporate law of another state. This can help facilitate the closing of a financing and save transaction costs.

As a result of all of these factors, the Delaware “C” corporation generally is the entity of choice for start-up companies.

This article is provided by Hutchison & Mason, PLLC. Hutchison & Mason is a Raleigh, North Carolina based law firm specializing in information technology and life science companies. Their web site is www.hutchlaw.com.

$50,000 Needed By February 10, 2004 for Youth Entrepreneurship

"What I Would Do With $50,000"
by Don Herman, entrepreneur & educator

$50,000 by February 10th, 2004, will provide a year's worth of entrepreneurship education & networking for foster kids and "at-risk" teens in the Los Angeles area and school system. Beginning February 2005, this will be followed up with a $1.8 million foundation grant to the National Foundation for Teaching Entrepreneurship (nfte.com), to expand the program through 2007. All money raised is tax-deductible, and each contributor of any amount will receive a weekly email update on the progress of the Southern California At-Risk Youth Entrepreneurship Program, throughout 2004.

For more information, and a summary of the results of the 2002 Summer Entrepreneurship Program for L.A. At-Risk Youth, contact:

Don Herman
Southern California
"Helping Teens Turn Hobbies Into Businesses Since 1997"
entreclub@aol.com

Additional information: Don Herman has been helping teens start businesses in Southern California since 1997. Using his experience of starting two sole proprietorships and two corporations (one "for profit", and one nonprofit (501c3)), Don has given 350 in-class workshops annually to high school students, on the topic of turning hobbies into businesses. In 2004, he is helping the National Foundation For Teaching Entrepreneurship (nfte.com) establish a regional program in Los Angeles, to help at-risk & foster youth learn about entrepreneurship.

Content for Your Web Site

If you have a web site that has to do with business, entrepreneurship, marketing, web marketing, ebusiness, personal development, or economics and would like high quality free content for your web site, you may sydicate the following articles from our web site. These articles are stored in zip format and can be downloaded by clicking on the appropriate link. We simply ask that you keep the author byline at the bottom of each article per the instructions included with each zip file. If you choose to use any of the articles we ask that you notify us at info@zeromillion.com.

48 Articles - Authorized Excerpts from Zero to One Million
45 Articles - Articles by Ryan Allis, June 2002 - July 2003

Closing Notes

This concludes issue eight of The Entrepreneurs’ Chronicle. We'll see you February 1, 2004. If you are not subscribed and would like to subscribe, please visit http://www.zeromillion.com. If you would like to contribute content, become involved with the zeromillion.com team, make suggestions, or provide feedback please feel free to contact us at info@zeromillion.com.

This newsletter is published by www.zeromillion.com with support from the Entrepreneurs’ Coalition and the Center for Entrepreneurship at the University of North Carolina at Chapel Hill. The newsletter is sent using the IntelliContact Pro web-based email marketing and list management software.

Comments/Suggestions: info@zeromillion.com
Contribute Content: content@zeromillion.com
Contact Publisher: ryan@zeromillion.com

Archives online at: http://www.zeromillion.com/echronicle/

"The person who actually knows what he or she wants in life has already gone a long way toward attaining it." – Napoleon Hill

Books & Products By Ryan P. M. Allis

Zero to One Million Guide for aspiring entrepreneurs on how to build a company to one million dollars in sales. Price: $14.95 | More Info

Obtaining a #1 Ranking in the Search Engines The book the professionals use to consistently obtain top search engine rankings Price: $37.00 | More Info

IntelliContact Pro by Broadwick Corporation is web based software that enables you to send out permission-based HTML and text newsletters to your prospects, customers, and subscribers and track campaign metrics such as opens and clickthroughs. Manage and contact all of your prospects, customers, affiliates, employees, and suppliers. With plans starting at $12/month and a free fully functional fifteen day demo, IntelliContact Pro is a top choice for list management software. We encourage you to sign up for a free 15 day trial or learn how IntelliContact can benefit your organization. If you have any questions about the software feel free to contact CEO Ryan Allis at ryan@broadwick.com or Vice President of Marketing Josh Carlton at (919) 968-3996.

Virante provides web site design, web marketing consulting, and search engine optimization services. Learn more at www.virante.com.

All Contents Copyright © 2004 by Zeromillion.com, the top entrepreneurship resource online