One of the hardest questions that new entrepreneurs face is: When to pay themselves?  I have seen all sides of this question.  I have seen those who won’t even start a company until they gain enough capital investment for a paycheck and I have seen those who always find a reason to hold off on paying themselves.  Which way is right?

It probably won’t surprise you to hear that the right way is a happy medium to both of the described ways.  But the ‘why’ is what might interest you.

1. Payday immediately – This way is wrong for several reasons.  First, you may never even start your company because you are ‘waiting’ for enough capital investment to pay yourself.  Second, many of those who are looking to invest don’t want to pad your pockets.  Whether angel investors or friends, most ready to give you money for your idea will want to give it to something in the business.  It is hard to invest in a company when you know it might actually be going to your new car!

The next reason is that your new company is too cash flow fragile to start paying yourself.  Essentially by taking the money yourself you are limiting your company’s future growth by limiting its purchasing power.  You will find many things you should do for your company that you can’t because you lack the funds.  Just remember if your company starts to succeed you’ll earn a much greater paycheck if you just show some early sacrifice.

A last and final reason to wait on the paycheck is to wait until you’ve earned it (wait until you start to reach success).  By waiting you won’t be dilusional that your company is doing well when it is not.  You’ll be hungry and literally working for food.  With your back up against the wall you’ll find that you’ll work harder than you ever have in life.  You also won’t over-charge for your product. I have seen inventors seemingly try to earn all their investment back in one sale because they are trying to get ‘paid’ right away.  By pricing to get paid asap, you are most likely pricing your product(s) out of potentially a real success.  Buyers are smart and sales will be severely limited if your pricing is padded to give you that paycheck now.  Work hard, stay hungry and you’ll get to a paycheck.

2. Waiting for Payday – This way is also wrong for several reason.  First, you must recognize your value.  No one else is going to recognize all your hard work by paying you, so you must do it yourself!  Think about this; if you don’t pay your Accountant, Lawyer, or Graphic Designer they’ll come after you and demand their money.  If you don’t pay yourself no one will come after you… but why are you less valuable than your hired out professionals?  Truth is, you are the most important person in your company and once the company starts to succeed that must be recognized by a paycheck.

The next reason is that if your company is really going well and has a chance to be successful, it must be able to support your paycheck.  No one will want to buy your company if they look at the books and realize that the ‘owner’ never got  paid.  This will scare off any potential purchaser as they will be concerned that something is wrong with the company.  They will feel the company can’t afford the needed expense and will not be convinced until they see the necessary expense on the books.

A last and final reason to pay yourself when the company starts to succeed is that you deserve it.  You didn’t leave a cushy (yet boring) job to earn nothing.  You quit so you can make a better life for you and your family.  Respect yourself and you’ll find a greater appreciation for ‘doing your own thing’ and the entrepreneurial life you dreamed of.

It’s official Dorm Co, www.DormCo.com has launched.  Most of you know I launched Yak About It back in August 2009 (the same month I sold my first company).  Now after 5 months of intense planning I am pleased to say Dorm Co, (my second take on retailing college dorm essentials) has launched.

Being excited to launch may not surprise you.

What might surprise you is if I told you I don’t care about sales for the first 1-2 months.  Sure, getting sales is a good thing, but it’s not the focal point.  What is the focal point is ensuring the company and website foundation is strong enough to take on a large amount of orders.  Many entrepreneurs aim to race for the quick sale only to leave the entire company vulnerable to faltering long term.  My best advice is to build for long term success and to create a company that puts you in the best position to sell in the future or grow into a large functioning entity.

If any of my fellow entrepreneurs have feedback for me regarding Dorm Co please feel free to share the good or the improvement ideas at Jeff@DormCo.com.  In kind I would be happy to review your website and/or products and offer my opinions.

Thanks for helping me take the first couple of months to make a strong company foundation!

While flipping through an outdoor magazine, I found an article about a new product. The article was about a guy who turned a “passion” into a new product.  A regular guy with a regular job (Repo Man) that invented and developed a new product for hunters. The quote that hit me like a freight train was: “By time it was all said and done I had around $90,000 in the (plastics) mold.” A chill went down my spine.  I could see this poor guys future.  To ad “salt to the wound”, the magazine got the guys web site wrong.

Checking out his web site, the product (as demonstrated by the inventor on video) seemed difficult and clumsy. It really wasn’t, but the inventor was so impressed with all the product features he thought were important, he forgot what was important to the consumer… “What can it do for me?” Then I saw the packaging… A simple cardboard box with green and yellow markings. The pricing point was $24.95.

My first inclination was to send him a copy of my book, Invent-onomics 101, and beg him to read it. But after seeing his web site (very nice and expensive), I realized he was already well down a path that had a high percentage of ending in heartache.

Where to start: 1) The market size for a product like this is about 5,000 to 10,000 units tops, assuming you get it into the large retailers. 2) The Chinese would have made the same tool for about $15,000 and reduced his per unit cost by up to 60%. 3) His pricing point ($24.95) is too high… his retail competition is less than $10.00 and could be done easily for free.  4) His packaging hides the product and is too easy to rip open on the retail shelves. People won’t buy a new product unless they can see it and the retailers won’t replace the “ripped packaging” product on the shelves until it sold off… Etc., Etc.

The bottom line: Most of us only have one shot at this… Before you start spending your life’s savings, read a book, ask somebody in the industry, work in the industry to see what’s required to actually sell the product… Look at the market and see if it can support your cost structure.

I hope I’m wrong and this guy’s a huge success… But this isn’t my “first rodeo.”  I’ve seen too many people think “if I build it, they will come.” History shows that 99.9% of the time, they don’t. Do your homework first to avoid blowing your shot at success.

Having a website based business is great way to reach a large market but it is not what many imagine – it is hard work and it is never done. Starting a website based business takes iterations – you have to find best way to communicate the problem and your solution in an instant. You have to be willing to talk to customers to see what brought them to you and you have to be willing to experiment. You really have to have your ears and eyes open – surveys and follow-up emails are great and inexpensive ways to gain valuable insight. Salesforce.com is a perfect example – they are masters at doing this and it is reflected in their success.

In the case of our flagship software application, called Phitch, which makes it easy for small business to optimize their inventory, it has taken numerous iterations to create a website that describes the problem. After all, it is one thing to get a visitor to your site, but is another to have them click and buy from you.  The key is talking about the right problem. In the beginning, we assumed most visitors would want to learn more about how Phitch can put more money in their pockets – especially in this tough economy. While this was important, what visitors also really wanted was a solution that was an easy delightful experience – they just wanted a “just do it for me”. In other words, we also had to design our message to appeal to this issue.

While it is tempting to put more and more information on a website to address each problem you uncover, this is where real restraint comes in. It is easy to add more content – it is hard to do in a manner that will be read by a visitor. A website is just like your appearance – you have an instant to make a first impression. Getting the opinion of others, especially those with experience in journalism or communications is a great way to improve your website. If you can afford it – this is well worth the investment but be prepared to change your content frequently.  You have to continually hone your content to make it shorter and quicker to understand.  Too often, I see website pages that are four pages long and you have to scroll through a long list of information.  A website should be like an onion that a visitor peels – a very small onion with short and direct pages that guide your visitor to contact you. Have just enough information to get your visitor to call, email, try, or buy.

The final difficulty is to design a short compelling message to the visitor regarding your solution to their problem. You really have to identify with your visitor – who are they – envision a name, age, education, etc…. Find something that will resonate with this picture. In the case of Phitch, I envision a small business owner who works out of his/her home with no other employees and they are passionate about their craft or product.  They have education but they are not trained in inventory management. They import many of their goods and there are looking to add world class supply chain expertise without having to add staff. They are looking for simple and affordable solution that simply tells when to order and how much to order. To communicate this message we do in a way that our visitors can relate – we compare poor inventory management to coronary artery disease – that it is a silent killer.

About John Krech: Launched Phitch as a software tool to help small businesses best manage their inventory.

As the founder of an online company, I was recently asked what advice I would offer other entrepreneurs about my journey as an entrepreneur/inventor.   I write this from the perspective of a wife and mom of two kids – 11 and 14 – re-entering the workforce after 10 years of being a stay-at-home mom.

First, and foremost, PLANNING for your dream to become a reality is vital.  Bringing an idea to life can be a daunting task.  Don’t be surprised if others aren’t as positive as you’d like – convincing them that your ideas will work can be a challenge.  Be sure you write a business plan to define your business, your competition, and your strategic approach, establish your alliances, and lay out your marketing/advertising schemes.  It may change as your business takes flight, but this plan will help guide you in the beginning stages of development.

Lay out your financial strategy.  Try to anticipate expenditures in advance, and attempt to stick to your budget.  Understand where the money is coming from and who else might have to sacrifice their lifestyles along with you.  If family funds are being tapped into first, engage your spouse (if you have one) in the process and explain your strategy.  If kids are part of your life, you’ll be amazed at the creativity they can offer.  A family team approach makes for a much happier process if money and your time have to be sacrificed to realize your dream.  Set your dollar limits and re-evaluate every six months to stay in check.

Be honest and realistic about your timing.  The “Five Year Plan” may be in your cards – not a bad thing since many other experienced inventors have followed this path.  Some are fortunate to have their products catch on quickly, while others find that they have a work in progress.  Remember that being over anxious and rushing may present an “incomplete product or concept” to the public, causing them not to return for a second look.  Planning with patience is truly a virtue.

Don’t lose yourself to the extent that you jeopardize long-term relationships with family and friends.  Having them understand your dream will result in a smoother journey.  Those closest to you can be helpful when you’re seeking ideas and support.  As creators, we are often too close to our products to recognize the pitfalls. Outsider input can be the key to new creative approaches.

Lastly, stay HEALTHY and love what you do!  Keeping to a routine of good health and fitness – which includes SLEEP – will keep you mentally sharp and help you endure those long days of work.  If you are passionate about what you do, it will be evident to all your customers.

About Julie Wilson:  The motivation for creating my online study site, Qwizzy’s World, was the need to have my children learn the art of studying.  Differing from other sites, it was intentionally designed WITHOUT a data bank of pre-made quizzes – working with a student’s critical thinking skills – teaching students not just what to study, but more importantly, HOW to study.  QW stores quizzes so they can be taken as practice as often as needed.  This exercise helps to not only reduce test taking anxiety, but to promote learning vs. mere memorization.  The site scores the quizzes for immediate feedback and also offers a cool way for students to study together through Buddysharing.  With the touch of a button, quizzes can be combined into an Ultimate Quiz to study for cumulative tests – like midterms or finals.  With a simple click, quizzes are also turned into flash cards – for students who prefer that style of studying.

I was fortunate to not only have family support through the design of QW, but to watch my own children benefit from all my hard work!  Good luck to all of you starting out on your journey.  We welcome you to visit us at www.QwizzysWorld.com for more information.

I am an attorney, practicing 30 plus years in Dallas, Texas, until I brought my concept of a wholly outsourced word processing staff for attorneys and law firms to market in 1997.  Today we serve over 35,000 clients nationwide.  That venture is absolutely the crowning achievement of my career, far outdistancing anything I ever did or learned in my very successful law practice.  There are so many things involved in such an adventure that it would be very hard to chronicle them all, but two items specifically come to mind as to what might be helpful for entrepreneurs starting out.

Entrepreneurial Tip 1: First and foremost, always be mindful of the money.  Whether you’re starting out with venture capitalists, trying to put together a pay-as-you-go, self funded plan, or anywhere in between, money and your management of it is all-important.  Even if you have venture capitalists screaming at your door, that is not always the right way to go.  There are many very important decisions you’ll have to make as you move through your business that have to be made without clear cut right or wrong answers, and if you can avoid the entanglement of money and the strings attached with it, you are dramatically more likely to be successful in the long run in making those right decisions based on what’s good for the business, rather than what is good for (or dictated by) those money interests.  Try to line up what money you can as you begin and as you go forward, do not take on something, or try to move at a speed that this money will not support, and treat every dollar you get like it’s the last one you’ll ever see.  If you have a good idea, money will come in boatloads at the end, but the way you treat this early money is determinative to a very large extent of your likelihood to be successful.

Entrepreneurial Tip 2:  Second, trust your own judgment in most all of the decisions that you have to make.  There are experts now on every conceivable subject and many, many people who will try to persuade you to substitute their judgment and decisions for your own.  Don’t be overly awed by credentialed or “expert” sources for advice.  I have always found that it is a good practice to get as much advice on as many subjects as you possibly can do, but in the end, go with your own instincts and life experiences and do so with the comfort of knowing that you’ve sought all of the input that you can get before you make that final decision.  The final product and result is going to be yours, after all, so it should reflect you, your wisdom, your character and personality, so don’t let yourself get snowed by someone who claims to be smarter than you.

About Richard Jackson:  My company, SpeakWrite, is an outsourced method of accomplishing something that is absolutely essential to anyone involved in the business world, from beginning entrepreneurs to major law firms.  It puts the ultimate control of your costs of providing one of the most essential parts of any business – documenting thoughts, communications, ideas and data – totally under your control and on a pay-as-you-go basis.  For details you can visit our web site at www.speakwrite.com.

I launched my first business in January and the most important thing I have learned is that sometimes you have to say no to your dreams.

I never realized this before because I have never had a job that allowed me complete control over my workday. Before becoming an entrepreneur, I had a handful of salaried jobs that I excelled at, for the most part. (Who hasn’t been fired at least once?)

Most of my salaried jobs were as a reporter for daily newspapers. I was especially good at making deadlines, pursuing opportunities and leaving good impressions. My tasks were well defined and I was good at completing them.

But putting my future in my own hands seemed more promising than following directions in a tied-down corporate structure that moved like molasses. I craved the ability to try things, fail, learn, adjust, and try again. With my work ethic I knew I had a good shot at entrepreneurial success. Plus, you’ve heard newspapers aren’t doing so well, no?

What I quickly learned after launch is that more than working hard and putting in long hours, I had to prioritize my goals or BargainBabe.com would never work.

Everyday there were hundreds of things I needed to do but I could only accomplish about seven of them. I hesitated to prioritize because that meant putting a book, podcasts, regular videos, and a lot more on the back burner. Instead of prioritizing my goals, which meant saying no to a lot of dreams, I tried to work on all of them.

Guess what? I accomplished none of them!

I finally sat down with an advisor who specializes in marketing and business planning (read: my sister) and chose one goal – to make $50,000 off my blog – and put in writing the steps to reach the goal. Then we turned those steps into daily tasks that I created time for in my online planner.

Over a two hour lunch we came up with a six-month plan. The questions she asked me were simple. What is your top goal for your business? What are the main things you can do to accomplish that one goal? How many hours do you need to spend on each contributing task every day or every week to make progress?

Before I had a daily plan, I was working on a lot of goals and achieving none of them. Now I am focused on one goal – making $50,000 off my blog in six months – and making significant progress towards my one dream. When I get there, I’ll be ready to bite off one more dream.

About Julia Scott: Julia writes the savvy-spending blog BargainBabe.com, which helps folks save money on groceries, gasoline, and household bills.