Lets categorize leadership phases based on how people would react when a leader ( YOU) takes an initiative:

1. Laugh: People would laugh on you. Quite possible, because you are doing something different than others. What you are doing makes no sense to others, otherwise they would have done it before you did. Maybe.
2. Silence: When you keep doing all the stuff which made people laugh , but then which generated results, it shuts the mouth of people who are laughing. Its a silence phase when mass stops laughing and quietly observe what you are doing. They try to understand what you do and how you to doit.
3. Follow: As a leader you continue do all the great stuff and people would start following you. There may be some bright talent around you who may get inspired by you and starts his own leadership phase, but most of them would follow you. They would try to mimic what you already did.
4. Worship: This is an ultimate stage and I guess not so easy to attain. Most of the leaders we know may fall under phase #3. This is stage where people start worshipping you almost if not same as God. People can do anything for these leaders.

So now you know that when you take a new thoughtful initiative and people are laughing on you, probably you are on a leadership path.

This I learnt many years ago while I was still doing my studies, from a person I admire  Kunwar Shekhar Vijendra.

What can my company afford to pay me?
What can I afford to pay myself?

As an active owner/operator of your business you must accept the conflict inherent in being both the boss and the employee.

The life blood of a business

Revenue is the life blood of a business. Revenue is the money that flows into the company from all sources and is used to pay for the expenses the company incurs doing its business. Revenue consists of three sources. Two of these sources we have discussed earlier. These are the proceeds from equity (sale of shares of ownership), and debt (sale of IOUs) offerings. These sources are critical to getting the business up and running.

The third source of revenue is cash/cash equivalents (sales of goods/services produced by the firm). Cash is cash in the bank. A cash equivalent is a very short term debt — an account receivable — owed to the company by a customer. Revenue in the form of cash/cash equivalents represents the only new money that can be used to sustain (pay expenses and debts) or grow (invest in) the company.
Cash flow is the key measure of success for a start-up. If the company is spending more money than it is taking in then it will eventually “bleed to death.” If it is taking in more cash than it needs to operates, then it can grow. The critical point for a start-up is the “break-even” point where costs and earnings balance out for the period.

The Active Owner and Cash Flow:

The active owner/operator faces a real challenge especially if the owner is a sole proprietor.

In the role of company owner, you want to insure that the business survives and grows. Survival gives your owner’s equity share value. Growth increases the value of that equity. Therefore as an owner you want to preserve and use cash efficiently to increase your revenue or the ROI for every dollar spent. One way is to minimize your cash expenses. In your role as a creditor, you also want the company to succeed so that it can continue make its interest payments and to pay back the loan principal.

In the role of employee, you want the company to pay you a fair wage/salary for your current time and effort. Just like other employees, you want a wage that reflects what you feel is the value of your efforts for the company.   Thus as the owner and creditor, your salary/wage represents an expense to company which increases the cost of doing business and reduces the profits and eats into capital. But as the employee, it pays your bills and supports your life style.

This paradox is especially challenging for the sole proprietor who, when considering taking a salary or wage, must choose between the short term and long term cost and benefits to himself and to the company.

Salary/wage is a taxable event:

As the active investor/owner your decision to take a salary includes subjecting yourself to federal and local personal income tax as well as the employee’s share of FICA (Social Security) taxes. Being a sole proprietor requires you to pay the full self-employment tax — both the worker and employer portions of FICA.

The Questions to ask yourself if you are planning to take a salary:

1. Just how much cash do I require to meet my personal obligations and needs?
2. Do I need a salary?
3. Do I want to pay personal income tax?
4. Do I deserve a salary?
5. What can I afford to pay myself?
6. How much can the company afford to pay me?
7. How much value will the company get for that expense?

Conclusion:

A Start-up business is a birthing process. You invest your time and talent, heart and soul, into an idea. You develop it into a concept, test it, and make a commitment to yourself, and maybe others, to take the next step. At this point you form a “company” to wrap around the concept thereby creating a new entity (a business) which is part of you but also has a separate life of its own. This entity requires revenue and nurturing if it is to grow and survive. Most start-up businesses that fail do so because they do not understand or plan for the financial responsibilities they are going to face when the founder(s) ask themselves — What am I worth? 

Starting a business, whether as the founder or a member of the founding group, is more than an adventure; it is an investment. No matter how exciting, challenging, romantic, fun, or brilliant the idea behind the business, unless it produces a financial return for the owners, it is nothing more than hobby.

Generally, a start-up business cannot afford to pay its owner(s) a salary/wage. Rather than paying salary or wages, compensation is often in the form of equity (ownership) based on past performance or debt (creditor) a promise of future earnings. Ownership is divided into two types: Active and Passive. Debt can be divided internal debt or external debt.
If you are asked, or decide, to work for a firm in a start-up situation, you should consider that the amount you can demand for your services falls into two parts, equity (value invested) and debt (value to be invested). What the company can afford to pay you at the beginning in ownership rights is your equity in the company.

Ownership Active or Passive
Ownership conveys the right to determine what the company will do with the assets its controls. Ownership is the right to benefit from, and the obligation to assume the risk for the acquisition, control and disposal of the company?s assets. The owners have a choice to actively participating in the day to day acquisition, control, or disposal of assets or they can simply participate in the benefits and risks resulting from this activity by hiring others to manage the assets. Active owners are both investors and managers of the company. Passive owners are simply investors. A Start-up is an investment.

Equity:
A start-up business is funded through the savings, sweat, and any other intellectual and material assets the founders bring and donate to the venture. This is the equity one has put into the acquisition of assets that the company uses for conducting its business.
To determine the value of your investment, start by determining what your donation (investment) has been to the business.
For example:  If you contributed, or donated, 80 hours a week for four months to get the business up and running, you would have contributed 1280 hours. The question is: ?What was my time worth when I agreed to “donate” 80 hours a week for 4 months?” Assume that you would have earned $75.00/hr elsewhere and you can justify this fee by past earnings records, then you have donated $96,000 of time to the company.

In addition, add any out of pocket expenses you incurred during that period and any material contributions you donated that you have not been reimbursed for, say, $4,000. Your total investment in the company is $100,000. This is your equity investment. This is what you should capitalize in terms of determining your equity position (ownership) in the company. That is, whatever portion of the company ownership you receive is worth $ 100,000 to you (but not necessarily anyone else).
Equity is the value you have risk. It is your share of the ownership in the venture and what you can loss if the business fails. Therefore it is critical that you value your contribution at the beginning.
As a sole proprietor, you will own 100% of your investment.
If you have active partners and/or other passive investors, then you will want to translate the monetary values of each into a number of shares or a percentage of ownership rights in the corporate entity. Check with your accountant and lawyer for the best way to set this up.

Conclusion:
If you consider working for a start-up company, your own or with others, don’t look at it as a job.  Look at it as an investment. The true value of your initial contribution will come in the form of your share of the company?s equity.
In parts 3 and 4, I will discuss how debt (lending your present value to the company) and salary (demanding immediate payment for the current value of your services) can be determined as portions of your total value to the start-up company.

This article made some rounds/buzz in the circle as people around suddenly thought they now know a proven way of not investing in/for these geographical location, or even throttling out users.

I wonder why would you not want your users to use your service?? After all users are using your services in legitimate legal way! They did not hacked away your bandwidth, but using the content you wanted your users to watch.

Issue here is with the business model you have chosen and NOT with user base of a specific geographic location. There can be nothing better if you have a shop and you have customers lined outside., but my friends You can’t sell same thing to everyone in same way. You should know how to monetize your content.

As Ram Charan points out in one of his videos, you would need to think like a shopkeeper around the corner.

Another example I want to quote is of Twitter. Very famous, useful ( atleast for some) millions of users, revnues??? They may have some money making plans..but? On other hand look at another service SMS Gup Shup which is famous, useful ( atleast for some), around 20 million users, and revenue=$150,000 USD and expecting break even in couple of months. Importantly, GupShup is on the way to make profits by ‘selling’ to people in the same geographies.

Barry R. Bainton is founder owner of B R Bainton Associates, a virtual consulting firm. He have been a business consultant and life coach for the past 25 years serving small business start-up, non-profits and  firms in transition.  Barry have a PhD in anthropology and MBA in international business.Below is a multi-part series about ‘what I am worth’ by Barry a common dilemma faced by many.Also checkout Part-2, Part-3, Part-4

I have been asked many times, by entrepreneurs and those considering starting their own business, — What should I pay myself?    How do I price my services?
It is a question I have had to ask myself, as a sole proprietor/consultant, from time to time as well. My experience with start-ups is that there is no formula for executive compensation, other than the survival of the company. If you are the sole proprietor, or owner of the company, you assume the full risks of the business. This entitles you to the full rewards of the business. If you are part of a group of business founders, then your ownership risks and rights (unless a partnership) are determined by your share of the corporate entity you formed. Partnerships are a special form of business relationship — like a marriage, where each partner is responsible for the debts of the others.

So how do you determine what you are worth when you decide to start a business, alone or with others?
The Simple Answer:

1. To yourself, you are worth what you want.
2. To the company, you are worth what it can afford.
3. To the market, you are worth what you are willing to settle for and the buyer of your services is willing to pay.

How do you value your contribution?
When you start a business alone or with others, you wear many hats — investor, owner, lender, operator, laborer, marketer, financial wizard and broom pusher. Each hat comes with different responsibilities. You will be balancing many conflicting demands on your time.  In the broader market place, each of these roles commands a different wage rate. And in a mature company, each would have a different individual performing the role. But in a startup you may perform all of them. In the beginning, everything that you do to build the business is priceless and contributes to the company. Some of it is your time; some of it is your talent; and some of it may be your fortune (savings). These are the elements you need to consider when pricing your contribution. Your contributions will increase the company’s value. This, in turn, will increase the value of your share of the company.

What can the company afford to pay?
The value of the company is measured in terms of equity, or ownership rights to the profits and responsibility for the losses. All startups depend upon an initial equity investment of time, resources and money in order to get started for which it exchanges a share of the ownership. For start-ups cash is king! And only sales create cash. A start-up company can survive only as long as its cash (available funds) and sales can cover the cost of its expenses. A company can only afford to spend cash if that expenditure will be replaced by sales revenue.

What does the market tell you about your worth?
There are only three sources of funds for the company to use to pay you

1. Equity (investors’ savings and profits retained in the company),
2. Sales (net profit from sales of goods/services to customers)
3. Debt (borrowings from you and other creditors)

Of these only Sale produces New Money. Equity and Debt redistribute existing funds borrowed from the past earnings of the investors or future earnings of the company. These are the elements of the company’s business model and should be the elements you consider for your own personal business model.

Planning for your value to a start-up company
The better you plan how you will manage these elements, the better you will be able to determine how to maximize your return from the startup. Questions you should ask yourself are:

1. “As a potential owner how does this business venture fit into my personal life goals?”
2. “Is this business a means to an end, or is it the end itself?”
3. “Will I own the business, or will the business own me?”

Conclusion:
These are daunting questions filled with risks.  As a sole proprietor or a member of a team of investor-entrepreneurs, it is an opportunity to be part of something where you can see a real impact that your skills, experience, talents and efforts can have. It is an opportunity full of potential for personal freedom and satisfaction. And it can be financially rewarding.

How you will want to value yourself depends on your personal business model.  I am going to discuss how you answers to these questions in Part 2.

Its like dream come true, when you get you meet in-person with individual like Dr APJ Abdul Kalam… In old northern Indian style..”..ganga naha liye..”

TIE Seattle had recently organized Dr. Kalam’s talk which I get to attend as well.

Introduced by Bill Gates Sr. , Dr. Kalam talked briefly about various talks he has given in his current trip which included trip to Boeing, University of Washington and talked about his Vision 2020 and how entrepreneurs and NRIs can contribute in it. He shared some great leadership examples he learnt and observed in his life.

This followed by a Q/A session which was like a classroom scene, where students where amongst the industry leaders/veterans in Seattle and teacher was Dr. Kalam . In his typical style, Dr. Kalam asked all of us to recite some lines after him and later asked..if its hard to follow the mantra in our life.

Talk was inspiring and many a times humorous as well.

I even get to meet him in person! which in gamer’s language would be *Another achievement unlocked*

I stole above line from a great deck by Fred Wilson on Startup Culture, Internet & Television.

You must watch this video interview for two reasons:

1. They way video has been hyperlinked within itself to browse through the talk.
2. Actual talk from Eric, who speaks in general about innovation, management, future challenges and more.

Like Job Security or Large Job Cuts. Jet Airlines recently announced to lay off 800 employees. I am sure there are more in same queue given that it might take 2-3 years economies to recover from global meltdown. Some of the top IT companies in India has already decided  NOT to do annual increment for their employees.

What would employees do in this situation? Look for job, increase their network. Networking sites like LinkedIn has posted increase in their usage:

You must be thinking what it has to do with Startup, as LinkedIn is not the one. When you start a startup in bad economies:

1. You get human resource cheaper than what you would get in the booming economy days.
2. Your business proposal will get vetted much more minutely. While a good review does not guarantees (which attribute does??) it but it would make founders think harder and plan more wiser.
3. Less competition. Not all dare to start startup in economic stability ( ignoring the fact that tumbling stock markets is not the single most factors in the success/failure of the startups)

Starting a business may still seems like a good idea when economy is good, but that does not guarantees anything. So, when nothing seems to be guaranteed in this world, why not just take plunge without fearing about share market.

My answer was its going to be mix of both experienced and freshers (all size doesnt fit in here) and depends on various things.

It depends on:

1. What role & responsibility are we talking about ?
2. Is that profile available in market ?
3. Importantly, Is that profile ready to join the startup?
4. Can we afford that ideal profile?

All of the factors varies with the grwoth of the startup. With its growth, there would be different set of responsibilities/role requirement in the company, Awareness about the startup would be more ( idealistically) and hopefully if there are lots of fundind/revenue happening, you may afford a bomb.

There would always be  situations where in you will have to compromise with this (and more), because its not the ideal world. What as an enterpreneur you have to design is, design the jobs/kind of reporting structure, which would optimize your resources.

So what can you do to find good hires? Alot! Checkout tips to attract talent by Vijay