Finding the best people and identifying the right staffing options for a small business can be a confusing and time-consuming problem. Every business has distinct needs, so there is no universal formula. However, here are a few principles that can guide you:

Do look for quality when hiring. Resources can be tight for small businesses, especially when you are funding everything out of personal resources, and it can sometimes be tempting to hire based on cost. However, according to Ken Abosch of human resources consulting company Aon Hewitt, “above-average performers contribute almost twice the value of average performers to an organization.” A high return on investment is crucial, especially with your limited resources, so hire the best talent that your company can afford. In the long run – it will offer the greatest return and the greatest value.

To help you identify quality candidates, consider working with a recruiter. For many small businesses, recruiters aren’t within their budgets, but as one Inc. 500 company owner has attested, the ease and speed of working with a recruiter —10 pre-screened applicants received, 3 interviewed, and 1 top-notch candidate hired within a month—made the cost more than worthwhile.

Do look for flexible options. About 40% of small business owners report that payroll is their largest expense, according to MasterCard. So being judicious about how you staff your business will be instrumental in managing your bottom line. Consider flexible options, such as part-time and seasonal staffing, staffing through a temp agency, and independent contractors that will help to keep your payroll expenses aligned with your sales. For odd jobs, online task services like TaskRabbit.com can help you find able helping hands.

Another option that you might consider is hiring an intern. Internships have traditionally been offered by larger businesses and organizations, but small business owners and entrepreneurs are starting to adopt the practice. When you don’t have any flexibility in your budget, hiring an intern can help fill a staffing need while also giving you an opportunity to test out a potential hire.

Do consider outsourcing. When you are running a small business, it may be tempting to handle all aspects of your business in-house. However, if the task lies beyond your core competencies or is a discrete project, outsourcing is often the better option.

For tasks that require specialized skills (for example, IT, design, web development, taxes, and accounting), it is more cost-effective to find an expert who can complete the task for you. This can be for non-discrete tasks such as accounting, as well. Some accounting firms charge a flat monthly fee (usually depending upon the number of hours or the number of employees), which can work out to a fairly low hourly rate.

Another area that you might consider outsourcing is general administration. Even though administrative tasks don’t require specific expertise, they can be time-consuming, and outsourcing theses tasks to a virtual assistant can help minimize overhead.

No small business owner can do everything herself, so consider all of these options when you need a helping hand.

Every two or three years I try to attend a VC roundtable event – a panel of VCs talking about the state of their industry. These folks really like to talk about themselves, which is why I find this an easy way to keep up with what is going on in the industry.

I recently attended one hosted TiE Arizona, the local chapter of a global association for entrepreneurs. There were six panelists representing a variety of firms: Eric Shiozaki of Apposite Capital in San Francisco, Robert Pothier of Renewable Tech Ventures in Idaho, Roman Kikta of Mobility Ventures in Texas, Sarah Ham of DBL Investors in San Francisco, Curtis Feeney of Voyager Capital in Menlo Park, and Brian Armstrong of Point B Capital in Denver.

Let me classify the key takeaways into three categories:

Some Things Haven’t Changed

• Home Runs: Out of ten deals funded, the panelists still expect only one or two home runs. And the consensus still defined a home run as a 7x to 10x return on their investment.
• The Team: The quality of the founding team is still one of, if not the, most important thing they look at.
• Control: When talking about valuations, they kept repeating that they didn’t want to take control of the firms they fund. Founders must continue to feel motivated to build their companies, and deals must be win-wins to work.
• Involvement: They all emphasized that they stay involved with their portfolio companies. They don’t believe that simply writing checks and reading quarterly status reports are enough.

Some Things Are Back

• Small Deals: With one exception (a specialized biotech firm), they all claim to have recently done deals as small as $200,000 to $500,000. Remember, these were venture capitalists – not angel investors. This is a reversal of a trend away from seed fundings that had been prevalent in recent years.
• Revenues: They all emphasized the importance they place on demonstrable, sustainable, growing revenues.

Some New Trends

• Angels: There was a lot of talk about the evolving relationships between Angels and VCs. None are reluctant to do deals previously funded by Angels, and several said they have recently done deals with Angels as syndicate partners. They no longer look at all Angels as single-round investors, but instead consider many as potential partners for the long haul.
• Crowdfunding: They anticipate that sooner or later, they are going to be looking at deals in which previous rounds were crowd funded. They are concerned about the governance issues of dealing with hundreds, maybe even thousands, of small existing equity investors. But they expect this will eventually get sorted out.

Probably the most striking thing was the apparent willingness of VCs to participate in seed fundings again – for good teams with good traction executing on a realistic business plan.

The New York Times recently ran an article, After Rocky Year for Start-Ups, Investors are Pickier, in which the author, Nicole Perlroth describes how funding may be getting scarcer for Internet and e-commerce start-ups and early stage companies. The piece is well documented and probably pretty accurate, even though it’s not great news for many of our clients and other Web entrepreneurs.

It got us to thinking how we should advise our clients who may face an even more difficult time raising capital than in the past. We’ll pass along a few suggestions later, but first, here are some highlights from the article:

• Brian O’Malley of Battery Ventures is quoted as saying that, back in the day, “entrepreneurs didn’t need a real monetization strategy” because companies would use their investment capital instead of customer revenue to fund their operations. Today you need to get to revenues as fast as you can.
• Ms. Perlroth points out that investors are growing nervous about “start-ups and applications that rely entirely on Facebook, Twitter and LinkedIn for customers.” This makes sense to us because the sustainability of these types of businesses is really dependent on another company’s continued success. You don’t really control your own destiny, do you?
• Our favorite quote in the article was from David Lee at SV Angel: “It has never been easier to start a company, and never harder to build one.” As we have said on numerous occasions, it’s not about the idea, it’s about the execution.
• While some of the views expressed in the piece were somewhat negative about the prospects for creating and funding new companies, the article did quote Marc Andreessen of Andreessen-Horowitz as saying that he felt that the opportunities for start-ups were “unending.” We agree.

So, what are the common sense things that entrepreneurs must pay particular attention to if they wish to raise capital these days?

• You must have a tightly defined target market.
• Don’t try to be all things to all people.
• You must know your space as well as or better than anyone else.
• Start small and be very, very efficient – use Lean Startup principles.
• Get paying customers or at least engaged users as fast as you can. Think freemium business model.
• Get them to return as often as possible. Make them sticky.
• If at all possible, be global.

One more thing: no investor will believe that you can build a great business unless you can communicate that you really know what you are doing. Don’t attempt to fund something that seems like a really good idea unless you’ve lived it day after day for a very long time. In fact, don’t even try to self-fund a business unless you really know it. Now go out there and make something good happen, and chances are, funding will come.

When you work for someone else, your biggest worry is typically getting fired. But when you own your own business, the stakes get considerably higher. Now you’ve poured time, energy, and probably much of your life savings into your new company – which is why it’s critical that you protect both your business and your personal assets from potential lawsuits and other disasters. There’s no shortage of things that can kill your startup when you least expect it.

In other words, you need good insurance. Below are the 6 most essential insurance policies for a small business or startup:

1. Liability Insurance. Hopefully you’ll never have to face any lawsuits in your career. But if you do, this is the policy that will protect you if you are found responsible for damage done to other people or their property. Make sure your policy will cover your legal fees, settle claims, and pay damages. If you manufacture products, be sure your coverage includes product liability in the event someone sustains injury as a result of using your product. If your business offers services, you’ll want to focus on “professional liability” instead. This coverage will protect you if a customer charges you with negligence or errors.
2. Workers’ Compensation Insurance. Depending on your state, you may be required to offer your employees Workers’ Compensation insurance. As you probably know, this provides benefits to employees who are injured or sickened on the job. Check your state laws to make sure you’re in compliance.
3. Property Insurance. This coverage protects your office and the assets inside in the event of theft and damage caused by fire, vandalism, accidents, or natural disaster. If you run your business from home, you might think your homeowner’s policy will cover your business inventory and equipment – but that isn’t always the case. Check to see if you need additional financial protection. You may be asked to choose between a Replacement Cost policy, which compensates you for the current costs of replacing your building, equipment, and inventory, and an Actual Cash Value policy, which covers those costs minus depreciation.
4. Business Interruption Insurance. Unforeseen disasters can bring business to a halt – but as the business owner, you will still be responsible for expenses like payroll, rent, and other fixed costs. This addendum to other policies will pay your bills while you’re out of commission and will pay you based on an estimate of the profits you would have earned during the disruption.
5. Commercial Auto Insurance. If your business involves transportation, even if just transporting supplies, you will need to insure the company vehicles. In some states, this can include the family car if used for company duties. Just like a traditional personal car policy, your commercial policy will cover liability, collision, comprehensive, medical payments, and uninsured motorists.
6. Life and Disability Insurance. Who are the rock stars in your company? Would an untimely death or serious long-term illness cripple the success of your company? If so, you may want to consider life and disability insurance for key principals – including yourself.

Rather than work with multiple agencies to manage your policies, your best bet is to find a full-service insurance brokerage who understands small business needs. Otherwise you might find yourself paying for overlapping policy coverage, or worse, be liable for coverage gaps because no one has a big picture of your needs.

A good insurance broker will develop a comprehensive insurance package that covers your needs while seeking ways to save you money by offering volume discounts and eliminating extraneous coverage. Then you can stop worrying about any random calamities and focus on the business at hand: making your company a success.

VCs invested $28.3 Billion in 3,267 deals in 2012. While the total invested was down by 7.5%, the number of deals was up by 7%, according to the most recent survey by CB Insights published last week. The mobile sector saw a five-quarter high in activity. Mobile deals are taking share away from Internet deals, according to CB Insight’s report titled “Venture Capital Activity Report – Q4 2014.”

Early stage deals dominated the mobile sector, with Seed and Series A funding comprising nearly 75% of all deals in the sector. This means that VCs see mobile technologies and applications as the new sweet spot.

Most of the deals in the mobile space were in the areas of wireless, video, CRM, health, gaming, and advertising. As the mobile market matures, with smartphones comprising over 80% of total device sales in the U.S., the market is ripe for mobile applications. The Android and iOS platforms comprise nearly 90% of the mobile market, with Blackberry (RIM), Nokia, and Microsoft left fighting for the remaining 10%.

The message for mobile app developers is clear: Develop for Android and iOS first. Unless you get specific funding from Microsoft or RIM, it may not be worth your while to go after the minority platforms.

Most of the $2.6 Billion invested in 2012 went to consumer apps, followed by enterprise apps, e-commerce and mobile payments, advertising, and video, according to Rutberg and Co. – a research firm in Silicon Valley:

Illustration courtesy of Rutberg & Co.

Investing in Apps, Not Companies

There is a new twist in investing in apps, launched by an ex-Nokia executive Tero Ojanpera. His firm Vision+, armed with $30 million in funding from Nokia and Microsoft, seeks to invest not in the companies per se, but in the apps themselves. It provides go-to-market funding to app developers, in exchange for future royalty streams. The benefit for entrepreneurs is clear: they do not have to give up a part of their company. The fund is looking to invest in up to 200 apps. Typical investments will range from $100,000 to $700,000.

The fund is focused on investments in Europe initially, with plans to enter the hot US market in the near future. It is platform agnostic. Even though the fund gets most of its funding from Nokia and Microsoft, it will invest in Android and iOS platforms.

The Path to Success

So how do you attract VC funding for your app startup? Here are a few pointers:

Most apps fail not because they have too few features, but because they have too many features. Try to find the sweet spot of features for your target audience. Select a demographic that is well-defined and easy to reach. Trying to be all things to all people is a sure road to nowhere.

Startups need a minimum viable product, not an all-singing, all-dancing version. Test this product with a select audience. Watch people use your app. Don’t ask them what they want. Steve Jobs famously said, “It is not the customer’s job to tell us how to design a product. It is our job to understand what will delight a customer.”

Recently Tim Cook, CEO of Apple, said: “Our job is to design products that you did not think you needed, but now can’t live without.” Think of the apps you use on a daily basis. Then design apps that will become part of the daily lives of your users.

VC’s are investing in mobile apps because that is where the growth is. Now is the time to think of an application, or a game, that will delight your users. Apple has paid out more than $4 Billion to app developers. Do you deserve some of that money in the future?

We recently learned about a 12-year-old consulting firm that we thought our readers ought to know about. Personal Business Advisors assists senior executives who have left or intend to leave the corporate world for one reason or another and wish to try their hand at something that is a little more entrepreneurial. They assist their clients in finding just the right opportunity, whether it be a senior level job, an investment in a franchise, or – and this is what we found really interesting – an investment combined with a “C” level or senior position with an early stage company.

Over the years, hundreds of entrepreneurs have hired us to help communicate the business and investment opportunities represented by their businesses. Many of them are scientists and innovators, and really need both management talent and capital to achieve their goals. So, working with PBA might just be the one stop source for capital and management that many entrepreneurs are looking for. And, don’t think that PBA only works with executives and entrepreneurs in the U.S. In fact, they have been very active in a number of other countries throughout the World.

A testimonial from the PBA website reads “I would like to offer this letter of recommendation to you and the entire team of advisors at Personal Business Advisors. Raising funds and finding executive talent to join the start-up team at our software company is extremely challenging on our own and in these difficult economic times. I have been so pleased with the quality of service and the caliber of potential candidates presented to us over the last 3 years.”

According to ExecuNet’s 2012 Executive Job Market Intelligence Report, the “top 10 industry growth sectors for executive hiring show continued strength in healthcare, technology and life sciences, but major gains are also expected for the manufacturing, business services, and consumer products sectors in 2012.” These industry groups correspond very closely with the profile of the entrepreneurs who visit our website every day.

We heard about Personal Business Advisors from Don Johnson who is, himself, a former senior executive with a major NYSE listed Fortune 50 company. Don is now an Executive Senior Advisor with the firm. He mentioned that “this is a terrific opportunity to bring together very talented senior level executives and just the right entrepreneurial experience.”

If you are a senior executive looking for an entrepreneurial opportunity where you can bring management experience and capital to an emerging company, or if you are a young company in need of experienced management talent, you should contact Don at donwjohnson (at) cox (dot) net.

As we begin a new year, you might be drafting a list of resolutions to kick your business up to the next level. Here’s one place to start boosting your profits: weeding out unprofitable clients and cultivating a more lucrative customer base.

When you’re new in business, sometimes any potential revenue can sound rewarding. The idea of discarding the less appealing customers might sound petty and pointless. But the reality is that you spend energy and money to attract and retain customers – and inevitably, some of them could be costing your business more in resources than they give back. By withdrawing your efforts from problem customers, you free up time and budget resources to woo more profitable clients.

Step 1: Categorize your customers

Your first job is to figure out who’s paying off and who isn’t. If you work in a field where you manage only a handful of clients at a time, your accounting books should help provide a quick answer to that question. Take into consideration your clients’ personalities as well. Who demands a lot of hand-holding and phone calls for even minor jobs? Who provides steady business and always pays their invoices on time?

If your business involves many customers, such as retail or hospitality, you will need to group them into categories. A café owner could divide his clientele into college students and professionals, the afternoon crowd and the night crowd, or by location. Look at the variables in your customer base and categorize accordingly.

Step 2: Calculate profitability

Your accounting software should help you match sales to customer groups. But that’s only part of the equation. Once you know what revenue each group is bringing in, you’ll need to calculate what each group is costing your business. To get an accurate idea, add up the following expenses. First you’ll want to calculate the amount you spend acquiring those customers through marketing. Next you’ll add the amount you spend on servicing and retaining them through staffing, facility costs, and follow-up service.

To make your cost analysis truly granular, you might want to hire an analyst. But even rough estimates should give you an idea of which customer categories are truly profitable, and which are wasting your staffing and marketing dollars.

Step 3: Cull the herd

Armed with this information, you have several choices for boosting profits. For your unprofitable customers, you might create policies to make them more lucrative, such as limiting free resources or restricting your services. Or you might decide to cut ties with them altogether by closing down a location, or no longer marketing to a specific demographic.

But the real advantage lies in having identified your profitable clients. Now that you know who’s pumping money into your business, you can devote more resources to engaging them and tailoring your offerings to their preferences and needs. You can also devote more of your marketing budget to courting new customers just like them.

Never assume you know right off the bat which customers and clients are your “best” ones. A basic analysis of customer cost and customer revenue can always yield some surprises. But once you do know, you’ll be eliminating needless waste from your budget – and positioning your company for higher levels of success.

Usually, when you launch a business, you funnel your resources and energy into your company – not into helping others. Yet we live in a time when many customers judge companies by their demonstration of compassion and integrity. This has become such a fundamental aspect of the business landscape that there’s even a name for such initiatives: Corporate Social Responsibility (CSR).

Check the web sites of most major companies and you’ll see content highlighting the work they’re doing to protect the planet or support their local communities. That’s because smart businesses embed their charitable projects in their marketing plans, using their community relations or sustainability efforts to engage customers and boost site traffic through clever promotion.

Yet while many big corporations have endowment arms, such projects can be a challenge for start-ups who lack the budget for grand philanthropic gestures. But even a modest effort can pay dividends in both positive publicity and customer loyalty – through a few simple actions:

1. Define your messaging. Don’t strike blindly at different goals, such as preserving rainforests one quarter and then investing in a community project the next. Come up with causes that resonate with your business culture, research the kind of support they need, then pick one and stick with it. One is enough for a small business – and don’t feel pressured to donate more funding or assistance than you can afford.
2. Involve your customers. If you haven’t picked a cause yet, come up with a list of alternatives and ask your web site visitors and Facebook fans to vote on which one they would like to see you support. Or actively seek their assistance, such as bringing old but usable technology into your store so that you can donate them to students in underfunded schools. Make sure you offer a potential reward, such as holding a raffle for all participants.
3. Create a scorecard. Make sure it features achievable and measureable goals and keep it visible on your site, tracking your progress. Be honest about any setbacks – you want the tone to be authentic, not promotional.
4. Use social media. Don’t just tell your customers what you’re doing; solicit their ideas, experiences and concerns to get them invested in your projects. Make sure you use multiple digital platforms – such as blogs, Facebook, Twitter, and a YouTube channel – to reach people with different media preferences.
5. Partner with a third party. Forming an alliance with a non-profit will not only lend credibility to your efforts, but let you benefit from the non-profit’s greater experience in fundraising and philanthropy. The alliance will also offer an opportunity to blend customers and networks.
6. Seek publicity. If you’ve never sought media coverage for your business before, this might be the time to start. Send out a press release about any contests, events or fundraising drives – and reach out to media outlets that present on green topics as they’ll be apt to give you positive coverage.
7. Repurpose your CSR reports. Using charts, stories, and photos in your annual reports and newsletters will appeal to stakeholders and shareholders alike.

Most corporate social responsibility projects won’t deliver an immediate boost in your company’s financial performance. But leveraged cleverly, they can bring positive publicity, enhance your corporate reputation, and deepen customer engagement – in addition to giving you the satisfaction of knowing you’ve truly assisted someone in need.

The Arizona Republic newspaper recently ran a front page article by Anne Ryman about the explosive growth of MOOCs. MOOCs is an acronym for “Massive Open Online Courses.” These are free online classes that are available to anyone with an Internet connection. Courses are offered by more than a two dozen universities including Harvard, Stanford, and MIT. The article points out those universities are offering MOOCs as a way to expand awareness of what these schools have to offer to potential students.

Many of the available courses relate to business or technology and represent a great opportunity for entrepreneurs who wish to broaden or deepen their experience in, say, organizational management or computer science. With MOOCs, students will not get college credit or be able to earn a degree, but still, “this might be attractive as a way to check out the latest developments in their career fields” wrote Ms Ryman. Many of the courses are self-paced, while others have a specific beginning and ending date.

Private companies that may or may not be affiliated with a university act as consolidators “by offering online platforms where the courses are housed.” Coursera is a perfect example, offering access to hundreds of classes. Here are three examples:

• Networks: Friends, Money and Bytes – Princeton University. “A course driven by 20 practical questions about wireless, web, and the Internet, about how products from companies like apple Google, Facebook, Netflix, Amazon, Ericcson, HP, Skype, and AT&T work.”
• Social Network Analysis – University of Michigan. “This course will use social network analysis, both its theory and computational tools, to make sense of the social and information networks that have been fuelled and rendered accessible by the Internet.”
• Organizational Analysis – Stanford University. “In this introductory course, you will learn multiple theories of organizational behaviour and apply them to actual cases of organizational change.”

We visited two other websites. One is EdX, a not-for-profit enterprise founded and owned by Harvard University and MIT. The site says that it “features learning designed specifically for interactive study via the web. EdX points out that in return for offering the courses for free, they will use the student experience to ‘research how students learn and how technology can transform learning.’”

Another MOOC site we reviewed is called Udacity which seems to offer a terrific number of business and technology classes similar to the ones highlighted above. The Udacity site says that it was “founded by three roboticists who believed much of the education value of their university classes could be offered online.” It goes on to say that over 160,000 students in over 190 countries enrolled in their first class, “Introduction to Artificial Intelligence.”

One more great example is Codecademy, a site dedicated to teaching web coding skills to beginners. The interactive tutorials walk you through the basics of HTML, CSS, JavaScript, jQuery, Python, and Ruby. Most lessons only take a few minutes and are accompanied by a discussion forum so you can get help from fellow students if you get stuck.

We realize that most entrepreneurs will say that they don’t have enough hours in the day to run their businesses let alone take a course. That may be true, but we thought that we ought to at least expose you to this very cool, very free opportunity.

[tweetherder]If one of your resolutions for 2013 was to learn something new, there are a lot of great opportunities for you to choose from![/tweetherder]

Why keep business records?

When you’re passionate about your company, keeping accurate business records can seem like a boring chore. It’s not the most glamorous or engaging task, and it requires patience and good organizational skills. But while dealing with paperwork can seem burdensome, a thorough and up-to-date record system can save you headaches and work down the road – and best of all, save you money at tax time.

It can also help you improve your client relationships and accurately assess your company’s performance. In fact, maintaining immaculate business records is critical if you want to:

• Prepare financial statements and tax returns
• Track and substantiate deductible expenses
• Monitor your business profitability and plot growth strategies
• Maintain attentive relationships with vendors and customers
• Protect yourself in the event of lawsuits

While specific industries sometimes have specific recordkeeping regulations, the practices described below are fundamental to all businesses.

What business records should you keep?

• Legal Records: Make sure you keep the following documentation organized and accessible: articles of incorporation, permits, by-laws, state filings, trademark registrations, patents, licenses, insurance policies, and employee records. And of course you’ll keep all of your own client contracts on file, along with the contracts you’ve signed from your suppliers and distributors.
• Accounting and Tax Records: Your financial records will usually represent the bulk of your records and involve the most complexity, so spend some time developing a comprehensive system. Many small businesses are launched with just a spreadsheet for their books, but most eventually move onto accounting software such as QuickBooks to help organize records and prepare financial statements. Do be aware that you will need a rudimentary knowledge of accounting basics like debits, credits, and journal entries. In addition, you should understand your profit-and-loss statement, balance sheet, and cash flow statement.Beyond recording your income and expenses, you will need to maintain these types of financial records: bank and credit card statements, annual tax returns and quarterly filings, inventory, sales records, invoices, purchase orders, and payroll.
• Client Files: Here’s where some legwork really pays off in client relationships. Not only should you maintain accurate records of work performed, contracts signed, and bills paid, but you should maintain a file of the client’s preferences, culture, dislikes, and goals. Recording this in a customer relationship management (CRM) system will help you accurately tailor your work to their needs and avoid strategy misfires.
• Strategy and Business Planning Records: While these won’t be as formal as your other records, it’s helpful to document your business decisions, initiatives, and goals. Date these records, just as you would with any invoice or transaction, and document the results. You will be able to quickly chart your company’s evolution, determinate the most effective strategies, and create a more profitable roadmap for the future.

What’s the best system for maintaining business records?

The recordkeeping system you choose should be tailored to the size and purpose of your company. Generally it is best to separate your official records – those required by the Secretary of State’s office in order to maintain your business’ legal status – and your financial documents. Your day-to-day documents, such as payroll and purchases, should be yet a third and highly accessible category. File hard copies in three-ring binders with index tabs for quick consulting – but whenever possible, preserve your records digitally as well.

Finally, make sure you schedule record maintenance on a recurring basis. Receipts pile up, contracts get lost, and client files get neglected. It’s easy to let paperwork devolve into chaos while you’re chasing “real” business. So stay organized, stay current, and perhaps most importantly – keep your digital records backed up.

Good business records are much more than a filing system. They’re the foundation of your company’s success. Devote some time to creating a comprehensive system now and you will thank yourself in the future.