This is Part 3 of an article series that tells the story of what I learned from several businesses that I’ve started.
With the website experience of the previous business and the explosion of security issues with email and the Internet, I thought I would try my hand at a software business that used a website with a downloadable program.
The idea was to create a security program that could be used with email to protect the content of the email from getting forwarded or read by an unintended person. To pull it off, I had to build three components; A web-service, a website and a downloadable program. With my technical background, I was always up for a challenge and within a few months, I had a complete working solution. Now came the hard part, selling it.
My idea was to follow the Adobe pdf model and give the program away as a free download and then charge customers for creating the files - similar to how Adobe charges for their Acrobat Writer program used to create pdfs. Following this proven model would help my program spread quickly because everyone was comfortable with Adobe’s model and it fit in with the next trend of ‘Software As A Service’ (SAAS).
About this time I remembered from the last business, that I need to start a Corporation. So, I found the papers that I needed on the State and Federal websites, filed the papers and paid the fees. The hardest part was finding the papers to file. But, the fees are small and the process is pretty easy. Before filing, I looked at the different between a Limited Liability Company (LLC), a Corporation and an S-Corporation. I decided that the best fix for me was the S-Corp, because I had only one own, wanted the tax advantages that were better for employees and didn’t want to purchase real-estate. Some say an LLC is the best for a small business, but I think that's only the case if you are involved with real-estate - which I was not.
Before registering the business I also had to come up with a name. This is where I learned how hard it is to name a new business or a new product, because almost every name in the world has been taken. I needed a name that was short and related to technology or computers or software, and I needed the name to be unique with my State registers office and I needed the website URL to be available. The only book that I found on the subject was called ‘Crafting The Perfect Name’, but it was out of print and someone had found one used book and listed it on Amazon.com for $250. Today, I own this book and it is very good, but I didn’t buy it until the used price came down to $17.95. Well, after several weeks of brainstorming, I came up with ‘Kaylib’. The ‘lib’ part was from the library directory on a Linux computer system, which I played with quite a bit in college. The ‘Kay’ part was short and easy to say and put together with ‘lib’ made a good sounding name. That's the story behind how my business became Kaylib Inc. My product also needed a name that was unique, yet self describing and not trademarked. So I came up with ‘Briefile’ and trademarked the name at my States Trademark Registers office – which was yet another learning experience. I used the legal service of www.LegalZoom.com to trademark the Briefile name.
Selling was very difficult especially because I was selling a security product to people that didn’t know me let alone trust my product with their company’s intellectual property. What if it didn’t work and their data was leaked? There was nothing that I could do to get it back. This was the greatest problem and eventually caused all competing products to become acquired my larger companies that had trusted relationships with their clients or they when out of business. I wanted my product to spread almost like a virus, from one person to the next and eventually force a business to pay for the service when all their employees were using it. As it turned out, employees don’t want to use anything that slows down their process of emailing – they have enough work to do, and they don’t care about their employer’s intellectual property.
I also created a business plan and pitched the product to a Venture Capital investor to try to get them to invest in my business so that I could build a sales team to push the product into the marketplace. I was unsuccessful, but learned a lot more about funding a startup business. Again, I found myself reading several books on business planning and funding startups.
Business Model Constraints
I had created an S-Corp with legal protection and a very good trademarked product. But, I didn’t have enough influence with any company large enough to worry about protecting intellectual property and without a national sales channel there was no way for me to market the product. Sales and marketing a critical elements of a startup business - more so then the product itself.
Primary concepts that I learned
The primary concepts that I learned from this business were;
Market respect – When you are new to the neighborhood, you don’t have any friends yet and it takes time to find your friends and discover why the bullies are. The same thing happens with a new business. You have to gain the respect of your competitor just as much as with your customers. Your competitors need to respect you to the point where they will direct their customer to you when they realize that you can serve them better.
A national sales channel is needed for a national product – If you want to build a national or global product, you need a national or global sales channel. Either partner with another business that has a national sales network or build your own – and building your own next to impossible.
Start small and local, than expand – It’s a good idea to have a vision for how your product could be sold nationally or globally, but initially it is more important to build a local customer base that you can use to support your business as you expand. Start small and local before trying to expand, but don’t lose sight on the big picture because the big money and the primary growth driver for you business will be when you expand nationally or globally.
Next article: Businesses I’ve Tried and What I’ve Learned - Part 4: Website Design
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