I was fascinated by the analysis of the Obama campaign. In many ways, Obama’s campaign and its success is a big, bright, “LCD sign” of the times. New media has come of age in a very public way.

Most people seem to agree that the campaign used a number of techniques to capture an audience and even inspire those traditionally lacking enthusiasm for politics. Some of my favorite attributes are:

Audacity – the fact that Obama wasn’t afraid to “redefine his target audience” and go after states like Indiana who this November voted for a Democrat for the first time in 44 years.

Mobilizing Large Numbers and doing it “Grass Roots” – unprecedented fundraising success by generating large numbers of small donations rather than small numbers of large donations to raise more than an estimated $600 million (McCain raised an estimated $250 million).

The Message Consistency – the message never wavered from the idea of being an “antidote” to the status quo.

But perhaps the most obvious and (to a techie like me) inspiring elements of witnessing this campaign was its focus on social technology to support and propel all of the other techniques.

The use of “new media”, from friend building on Friendster to the seemingly simple text message, proved to be a powerhouse for the campaign, as it extended the concept of “Team Obama” far beyond campaign headquarters literally into the hands of millions of Americans who voted and vocalized with their typing fingers.

For all the small business owners who couldn’t help wondering, wow – can I do that? My answer is Yes you can! (Sorry couldn’t help myself).

In taking a closer look, the technologies used form a rather familiar list:

• Official Web site: http://www.barakobama.com and http://my.barakobama.com
• Text messaging strategy – enabled via collecting phone numbers on a mass scale
• LinkedIn: http://www.linkedin.com/in/barackobama
• Flickr: http://www.flickr.com/photos/barackobamadotcom/
• Facebook: http://www.facebook.com/barackobama
• Twitter: http://twitter.com/BarackObama
• YouTube: http://www.youtube.com/user/BarackObamadotcom
• Meetup.com: http://barackobama.meetup.com/

The list reads like a “who’s who” of social media marketing.

But the real power in these technologies is understanding that the goal is not just to “set up” one tool or another, but to understand each tool’s potential. That potential in the Obama campaign was brought to fruition by:

• Having a consistent message
• Providing free and open access to “making a connection”
• *Always* keeping the tool up to date
• Providing pertinent digestible bytes of information that could be read, downloaded, passed on
• Leveraging the sheer quantity of enthusiasts and supporters on each tool to disperse messages almost instantly across an unbelievably wide, new network of venues and communities that hasn’t been seen since the invention of television.

Think about the leverage that a database of 948,000 people on MySpace and 3.1 million people on Facebook provides when you have a message to communicate (and consider that vs. McCain’s 221,000 on MySpace and 600,000 on Facebook).

As you think about your business and consider the challenge to build brand, generate buzz and stay on the radar as a small business owner with limited time and a limited budget, there are some very simple lessons to learn here:

1. Everybody needs a team. Whether you’re trying to build a team of millions of voters or a few thousand supporters of your business, build a team by building a venue for them to get involved. Even the simplest involvement can be powerful.
2. Email, the Web, and cellular technology have created an unprecedented venue for that involvement. Know who should be on your team and know the different ways they like to be involved.
3. Use wisely. Learn how these technologies work and learn by example how they can be leveraged to build a community of supporters for you.

This is an advantage that won’t last forever. As businesses gain competency in these techniques and learn to invest wisely, these techniques will slowly become standards rather than competitive advantages.

But it is possible for a growing small business to build a strategic, cost-effective and impactful social media campaign. As “Team Obama” has shown – yes, you can.

Maisha Walker is the Founder & President of message medium, a 10-year old New York City Internet Strategy firm that focuses exclusively on Small Businesses.  You can follow Maisha on Twitter or learn about her upcoming Web site and Internet Marketing Classes.

This business name stuff matters. You don’t get to do it twice, or at least not without a whole lot of pain and suffering. Most companies live forever with the first name they come up with. Factors that make your company name work include practical legal ownership, ease of use, ease of marketing and branding, and simplicity, to name a few. The domain name can follow later.

Would a rose by any other name smell as sweet?

I hope you recognize the quote reference here. My view is that people spend too much anxiety on the name, and too often without much business impact.

Palo Alto Software started as Infoplan, Inc., then changed to Palo Alto Software, Inc. a year later, and that hurt a little. But the new name was so much better than the old one that we didn’t mind much. But when we moved from Palo Alto, California, to Eugene, Oregon, we didn’t consider–not even for a second–changing our name again.

So I’d like to take another look at the business of naming a new business:

1. Make sure you don’t bump into anybody else’s name. Who wants lawsuits? If you’re brand new, you don’t want to have a specific name that conflicts with an existing business. Do a really thorough Web search first and, if you can afford it, talk to an attorney. Don’t let the attorney have a blank check; get an expense estimate first.
2. Don’t get hung up on the Internet domain name. You don’t have to have your exact favorite website domain name to build a business. If it makes you feel better, compare the traffic of amazon.com (huge) to books.com (tiny). Or flickr.com (huge) and photos.com (tiny). The smaller the better, but try to avoid frequent misspellings (silent letters, fone instead of phone, phreak instead of freak, for example). We can’t get around paloalto.com for Palo Alto Software, but that one gets misspelled a lot, and we lose people searching for the misspelled “buisness plan” instead of business plan. We eventually bought “bplan.com” because we were losing traffic to it from our existing bplans.com.
3. Get a name you can use. Real-world example: In 1988 I changed the company name of Infoplan to Palo Alto Software. A friend in PR said he’d done a search and there were 26,000 corporations in the U.S. whose name started with “info.” So here are some questions to consider:
   • Is it easy to remember? To say? To spell? Think of the names that work for you, in your life–your favorite restaurants, stores, services. What works for you? Why? I’ve never been able to say Iraila, a local restaurant (named after the owner’s mother), and–coincidence or not–I don’t go there.
   • Is it confusing? Does it sound like something else?
   • Is it cute, or possibly too cute? Cute names can work well or poorly, depending on the business and the target. Rhymes, puns and so on can be great or grating. I like Rhythm and Blooms, a local flower store. I don’t like FCUK, a clothing chain in the UK.

If you follow these first three tips, don’t sweat the rest too much. A bad name can really hurt, but the difference between an acceptable name and a really good name is a lot less than you think. What really matters is the meaning you attach to the name through years of doing business well. I think this is the right focus, on the company name first, when you’re starting up.

Start-up names and domain names

It’s hard enough to set a name for your start-up. But it’s much harder when you sweat the domain name too much and let it clog the creative process.

Thank goodness, when we renamed Infoplan Inc. to Palo Alto Software, Inc. back in 1988, we didn’t think about the domain name issue. Instead, as we decided that Infoplan was too hard to market and we discovered that Palo Alto Software was not in use as a corporate name in California, so that’s what we named it. It said Silicon Valley, it said Stanford University, and we lived in Palo Alto and had offices in Palo Alto.

It took us until late in 1994 to catch on with the Internet. When we did, paloalto.com wasn’t available (we bought it years later, so it’s ours now) but we made do with pasware.com, bplans.com, bizplans.com, and a few others. I’m very glad I also registered timberry.com at that time too; and some of my kids were glad I registered their names, too.

This comes up because I watch more start-ups these days, and I see them sweating over making the company name and the domain name both work, both be exclusive and also be coordinated. That’s really tough. And then there are product names and service names, too, which makes it even harder.

Factors that make a domain name work are ownership, of course, and a different kind of ease of use (is it easy to type and hard to misspell, for example), and a different kind of marketability (easy to remember, easy to defend).

I’ve been in some naming sessions in which we forgot some of the basics. Amazon.com isn’t books.com, and Yahoo! and Google meant next to nothing when they started. But they were short, easy to remember (well, sort of–I had trouble with Google for about half a minute) and, essentially, easy to market.

Try these three sites for more insight on company naming.

• The Name Inspector’s article What’s my name?
• Word Lab Tools
• Guy Kawasaki’s blog post The Name Game

One of the most amazing things is that regardless of the economic climate someone is always starting a new business. The entrepreneurial spirit and drive is unquenchable. Still, even in the best of times it takes more than spirit and vision to get your new business started and keep it alive and thriving.

Sometimes the idea for a new business is like a bolt from the blue. The idea for the product or service is unique, innovative, and exciting, and may be the first of its kind to enter the market, such as self-braiding shower mats made from recycled plastic grocery bags. And then again, for many people, opening that new business is an iteration of an already existing product or service. Another coffee shop or another convenience store or party supply/equipment rental outlet. Either way, the best way to protect that idea is to get started.

Regardless of the business idea, a whole lot of work will have to be done before you can hang out that new shingle or flashing-neon OPEN sign. Before anything else, you need to find out if there is anyone out there who will want to pay hard earned cash for your product or service.  You need to do market research to determine if there is a large enough pool of customers to open, build and sustain your business.

Every new business has to have a name, should determine its structure, and needs to be registered with a variety of governing agencies. Your business name could simply be your own name. Many businesses also describe the type of business they are in their name. Jack Smoothbore can name his business after himself, but if he names his business Jack Smoothbore’s Black Powder Emporium, all the historical re-enactors and antique firearms aficionados will visit the shop, making Jack more than a flash in the pan.

There are many types of business structures, from the sole proprietorship to publicly traded corporations. Getting some legal advice to help determine the best structure for your business’ needs is always a wise investment. Setting partnership details to paper can save time, money, friendships and possibly the business. If you will be seeking loans, investment or almost any type of financing you will need to have your business structure legally established.

Establishing your new business will entail registering within the local jurisdiction where you plan to do business. Probably the state as well. And of course, with the IRS.

And of course, there are the financials. At the bare minimum, you will need to determine your start-up costs, develop a sales forecast, make an estimate of your monthly expenses, and then look at your cash flow. Your start-up costs will show you how much money you need to put into your business to get up and running. Your expense estimate should include all those costs you will need to cover every month, whether you open your doors or not. The sales forecast needs to be realistic, show the affects of season, or calendar trends, or other fluctuations. If the sales aren’t covering your expenses, you need to know why and what you can do about it. And lastly, the cash flow shows you what your cash balance is every month. You could be profitable, and still be broke – especially if you’re selling to other businesses. Managing your cash is crucially important.

Write all of this down, everything you’ve done so far. Keep it in your computer files, both as written text and financial spreadsheets. You will use it to develop your business planning tool which you’ll use to manage your business all year long.

There are many resources here on Bplans to help you get your new business started and keep it healthy.

Get new business ideas and resources at our help section dedicated to new business development and planning.

We have a section on Starting a business including articles about new business basics, incorporating a business, market research, and much more.

There are over 100 FREE sample business plans available for you to read online.

To help with planning your new business financials, Bplans offers FREE online, real-time business calculators for Start-up Costs, Cash Flow, and Investment Offering among others.

We offer hundreds of FREE How-To Articles addressing the myriad facets of starting and running a business.

With Business Plan Pro, the best-selling business-planning software, you can quickly and easily build a plan for your new business, and then follow up regularly on that planning with ongoing management and implementation.

“Know the basics before buying a hosted solution”

SaaS Defined
SaaS (software as a service) is best described as a “hosted solution” or “web based solution”. The software application is accessed via the internet by the end user. This delivery method previously called the “ASP” model (Application Service Provider) or “On Demand” model allows the end user access to software without owning the software or hardware by accessing it over the internet.

Software Delivery Option
In the Past a small business would buy the software program needed to operate or support their business and simply install the purchased copy on their own on premise computer system. When these vital business tools needed to be updated, often more software would need to be purchased and installed. The software applications would be limited to the work station or pc where the software was installed.

Today almost every new business will be faced with a choice that simply did not exist a few years ago. SaaS (software as a service) or hosted solutions can enable companies of any size to instantly access the newest and greatest technology. The ease of adoption and scalability of these feature rich solutions can be an intoxicating no-brainer to any excited entrepreneur. But the true cost and long term impact on your business can be much less clear. Licensed software and equipment would be the traditional option and can offer a more certain fixed cost. Equipment while depreciating can also have tax advantages that should be considered.

Why SaaS for the Providers?
The Software providers love the SaaS model for one main reason…Profitability. The software developer has eliminated the need to pay for the cost of producing a box, CD, marketing shelf, and distribution network. This model allows for instant access to the end user and much faster “product to market” timeframes. Residual income models are often more profitable than the single purchase options of the past and can enable a more long term relationship with their clients.

What’s the benefit to me?
As a Web-based service, SaaS allows you to access business functionality at a cost typically less than paying for licensed application. Additional savings can be obtained by eliminating the need for additional hardware and equipment due to the hosted nature of the service. The daily upkeep and maintenance of the software, as well as the human resources allocated to the application is the responsibility of the service provider and enhances the savings and benefit to the small business owner. The pain and cost of installing new software is eliminated. Remote access is simple and easy with the SaaS model, as long as there is internet access. Software updates are made automatically and reflected in the newest, fastest version available each time a user accesses via log in.

Where is the risk?
The software provider will often sell the SaaS version directly through an online channel or a commissioned software sales representative. The profit margins can be massive and the software companies realize there is room to pay large commissions to highly skilled salesmen. There is little to no regulation on pricing and it is a buyer beware environment. One leading company in the web conferencing space trains their inside sales reps to start with a $4,000 “set up” fee. While more than 70% of the time the entire fee is waived, it is a good example of how important negotiating can be when buying SaaS.

Contact Technology Advocacy Group

Looking for help on how to start a business? Bplans.com offers a variety of free startup resources, all intended to guide you through the process of creating a business plan and getting financing for your new venture. Beyond these tools, we also offer Business Plan Pro software, which we recommend for new businesses, although it isn’t free.

Free business planning book

Hurdle: The Book on Business Planning — my full-length book on how to develop a business plan — is available in its entirety on the Web at www.hurdlebook.com. You can read the entire book for free. If you would prefer a hard copy, you can buy one for $19.95 on Amazon. The book is also included for no extra charge with our Business Plan Pro software.

Articles about starting a business

Here on Bplans.com, we offer dozens of introductory and intermediate articles on how to start and grow your business. The business planning section provides a step-by-step, start-to-finish guide to developing your own business plan. Other articles cover financing, marketing, growth strategies, and more.

Sample business plans

To help you get started on your startup strategy, we also offer over 100 free business plan examples for all sorts of companies — restaurants, retail stores, consultants, and more. This is an easy way to see samples of what a finished business plan looks like. The entire content of these plans is available here for free, and they all were approved for money in one way or another, so they’re worth looking at.

Don’t look for a sample plan you can just pick up and call your own, because every business is unique and every business plan is unique. Look instead for a good example of what’s included, and what’s involved in doing the plan.

Business calculators

Also free on Bplans.com is our series of business planning calculators, which make it easy to estimate your starting costs, return on investment, and more.

Business plan software

To make the next step beyond our free tools, take a look at Business Plan Pro. It is a software tool for developing a business plan, available for under $100. It includes over 500 sample business plans, including the 100+ available here. With its step-by-step process and SBA-approved document format, you can easily create a winning business plan on your own.

I strongly suggest that would-be entrepreneurs do a business plan. As a result of completing the plan you will be much better prepared and know whether or not your business idea is feasible. Try the following article for a short-cut. However, I caution you on following a short-cut unless you have substantial experience or knowledge about your area. Proceed with caution without a business plan!

How is your business unique, and why will your goods or services appeal to customers? What are the primary differences between your company and your competitors? What are the driving factors to choose your business over another?

In other words, what is the underlying reason a customer would do business with your company?

1) Define Your Business and Vision

Defining your vision is important. It will become the driving force of your business. Here are questions that will help you clarify your vision:

• Who is the customer?
• What business are you in?
• What do you sell (product/service)?
• What is your plan for growth?
• What is your primary competitive advantage?

2) Write Down Your Goals

Create a list of goals with a brief description of action items. If your business is a start up, you will want to put more effort into your short-term goals. Often a new business concept must go through a period of research and development before the outcome can be accurately predicted for longer time frames.

Create two sets of goals:

1. Short term: range from six to 12 months.
2. Long term: can be two to five years.

Explain, as specifically as possible, what you want to achieve. Start with your personal goals. Then list your business goals. Answer these questions:

• As the owner of this business, what do you want to achieve?
• How large or small do you want this business to be?
• Do you want to include family in your business?
• Staff: do you desire to provide employment, or perhaps, you have a strong opinion on not wanting to manage people.
• Is there some cause that you want the business to address?
• Describe the quality, quantity and/or service and customer satisfaction levels.
• How would you describe your primary competitive advantage?
• How do you see the business making a difference in the lives of your customers?

3) Understand Your Customer

It is not realistic to expect you can meet the needs of everyone, no business can. Choose your target market carefully. Overlook this area, and I guarantee you will be disappointed with the performance of your business. Get this right and you will be more than pleased with the results.

• Needs: what unmet needs do your prospective customers have? How does your business meet those needs? It is usually something the customer does not have or a need that is not currently being met. Identify those unmet needs.
• Wants: think of this as your customer’s desire or wish. It can also be a deficiency.
• Problems: remember people buy things to solve a specific problem. What problems does your product or service solve?
• Perceptions: what are the negative and positive perceptions that customers have about you, your profession and its products or services? Identify both the negative and positive consequences. You will be able to use what you learn when you start marketing and promoting your business.

4) Learn From Your Competition

You can learn a lot about your business and customers by looking at how your competitors do business. Here are some questions to help you learn from your competition and focus on your customer:

• What do you know about your target market?
• What competitors do you have?
• How are competitors approaching the market?
• What are the competitor’s weaknesses and strengths?
• How can you improve upon the competition’s approach?
• What are the lifestyles, demographics and psychographics of your ideal customer?

5) Financial Matters

How will you make money? What is your break-even point? How much profit potential does your business have? Take the time to invest in preparing financial projections.

These projections should take into account the collection period for your accounts receivables (outstanding customer accounts) as well as the payment terms for your suppliers. For example, you may pay your bills in 30 days, but have to wait 45-60 days to get paid from your customers.

A cash flow projection will show you how much working capital you will need during those “gaps” in your cash position.

I recommend thinking about these six key areas:

1. Start up Investment
2. Assumptions
3. Running Monthly Overhead
4. Streamlined Sales Forecast
5. Cumulative Cash
6. Break-even

6) Identify Your Marketing Strategy

There are four steps to creating a marketing strategy for your business:

1. Identify All Target Markets: define WHO is your ideal customer or target market. Most companies experience 80% of their business from 20% of their customers. It makes sense then to direct your time and energy toward those customers who are most important.
2. Qualify the Best Target Markets: the purpose of this step is to further qualify and determine which customer profile meets the best odds of success. The strategy is to position your business at the same level as the majority of the buyers you are targeting. It is critical to figure out who your best customers are and how to best position your company in the marketplace.
3. Identify Tools, Strategies and Methods: a market you cannot access is a market you cannot serve. Marketing is the process of finding, communicating and educating your primary market about your products and services. Choose a combination of tools and strategies, that when combined, increase your odds of success.
4. Test Marketing Strategy and Tools: the assumptions we do not verify are typically the ones that have the potential to create business problems. Take the time to test all business assumptions, especially when you are making major expenditures.

You need to explain the type of business you’re in. You’ll be expected to explain the general state of your industry and the nature of the business, especially if your plan is going outside your company to banks or investors.

Whether you’re a service business, manufacturer, retailer, or some other type of business, you should do an Industry Analysis, describing:

• Industry Participants.
• Distribution Patterns.
• Competition and Buying Patterns.

Industry analysis
Everything in your industry that happens outside of your business will affect your company. The more you know about your industry the more advantage and protection you will have.

A complete business plan discusses general industry economics, participants, distribution patterns, factors in the competition, and whatever else describes the nature of this business to outsiders.

The Internet has had an enormous impact on the state of business information. Finding information isn’t really the problem any more, after the information explosion and the huge growth in the Internet beginning in the 1990s and continuing in the 21st Century. Even 10 or 15 years ago, dealing with information was more a problem of sorting through it all than of finding raw data. That generality is more true every day. There are Web sites for business analysis, financial statistics, demographics, trade associations, and just about everything you’ll need for a complete business plan.

Industry participants
You should know who else sells in your market. You can’t easily describe a type of business without describing the nature of the participants. There is a huge difference, for example, between an industry like broadband television services, in which there are only a few huge companies in any one country, and one like dry cleaning, in which there are tens of thousands of smaller participants.

This can make a big difference to a business and a business plan. The restaurant industry, for example, is what we call “pulverized,” which, like the dry cleaning industry, is made up of many small participants. The fast food business, on the other hand, is composed of a few national brands participating in thousands of branded outlets, many of them franchised.

Economists talk of consolidation in an industry as a time when many small participants tend to disappear and a few large players emerge. In accounting, for example, there are a few large international firms whose names are well known and tens of thousands of smaller firms. The automobile business is composed of a few national brands participating in thousands of branded dealerships. In computer manufacturing, for example, there are a few large international firms whose names are well known, and thousands of smaller firms.

Distribution patterns
Products and services can follow many paths between suppliers and users. Explain how distribution works in your industry. Is this an industry in which retailers are supported by regional distributors, as is the case for computer products, magazines, or auto parts? Does your industry depend on direct sales to large industrial customers? Do manufacturers support their own direct sales forces, or do they work with product representatives?

Some products are almost always sold through retail stores to consumers, and sometimes these are distributed by distribution companies that buy from manufacturers. In other cases, the products are sold directly from manufacturers to stores. Some products are sold directly from the manufacturer to the final consumer through mail campaigns, national advertising, or other promotional means.

In many product categories there are several alternatives, and distribution choices are strategic. Encyclopedias and vacuum cleaners are traditionally sold door-to-door, but are also sold in stores and direct from manufacturer to consumer through radio and television ads.

Many products are distributed through direct business-to-business sales, and in long-term contracts such as the ones between car manufacturers and their suppliers of parts, materials, and components. In some industries companies use representatives, agents, or commissioned salespeople.

Technology can change the patterns of distribution in an industry or product category. The Internet, for example, is changing the options for software distribution, books, music, and other products. Cable communication is changing the options for distributing video products and video games.

Distribution patterns may not be as critical to most service companies, because distribution is normally about physical distribution of specific physical products such as a restaurant, graphic artist, professional services practice, or architect.

For a few services, distribution may still be relevant. A phone service or cable provider, or an Internet provider, might describe distribution related to physical infrastructure. Some publishers may prefer to treat their business as a service rather than a manufacturing company, and in that case distribution may also be relevant.

Competition and buying patterns
It is essential to understand the nature of competition in your market. This is still in the general area of describing the industry, or type of business. Explain the general nature of competition in this business, and how the customers seem to choose one provider over another. What are the keys to success? What buying factors make the most difference–Price? Product features? Service? Support? Training? Software? Delivery dates? Are brand names important?

In the computer business, for example, competition might depend on reputation and trends in one part of the market, and on channels of distribution and advertising in another. In many business-to-business industries, the nature of competition depends on direct selling, because channels are impractical. Price is vital in products competing with each other on retail shelves, but delivery and reliability might be much more important for materials used by manufacturers in volume, for which a shortage can affect an entire production line.

In the restaurant business, for example, competition might depend on reputation and trends in one part of the market, and on location and parking in another.

In many professional service practices the nature of competition depends on word of mouth, because advertising is not completely accepted. Is there price competition between accountants, doctors, and lawyers? How do people choose travel agencies or florists for weddings? Why does someone hire one landscape architect over another? Why choose Starbucks, a national brand, over the local coffee house? All of this is the nature of competition.

Main competitors
Do a very complete analysis of your main competitors. List the main competitors. What are the strengths and weaknesses of each? Consider their products, pricing, reputation, management, financial position, channels of distribution, brand awareness, business development, technology, or other factors that you feel are important. In what segments of the market do they operate? What seems to be their strategy? How much do they impact your products, and what threats and opportunities do they represent?

We are often asked by clients how to protect their ideas. The best way, of course, is to keep them secret. Any facetiousness aside, it is a sincere recommendation. Often people talk about their ideas to brag, to brain storm, and to make themselves feel as if they are adding to discussions. These are not good reasons to disclose information you want kept confidential. However, barring total secrecy, having a Confidentiality Agreement can help protect your ideas.

When to disclose information

Disclose information in increasing amounts as the deal progresses. Be sure that the balance of power in the deal remains relatively even in terms of oral commitments, commitments through information disclosure, money or contracts. The information disclosure should start with general concepts and progress to detail at the contract stage. Be sure to keep careful notes on what, when and where information was disclosed and who else was present at the meetings. These records can be extremely helpful if you ever end up in court.

Always disclose the minimum necessary to close the deal, without being fraudulent or misleading. This allows you maintain the most control over your product or idea, as well as protecting your options for changing the timeline or details later if needed. Once the deal is closed and the contract is signed, both parties should be more committed to the process and protecting information.

However, saying the minimum needed does not mean withholding material information that substantially affects the deal. For example, if your idea requires FDA approval, does not have it, and no one brings this up, it would be wiser to disclose this up front rather than to wait for this bomb to blow up after the deal has progressed. If a party feels angry or mislead then trust is broken, and, contract or not, it will be hard to proceed productively.

Consider who you are talking to about your product or information. Is the party a competitor who would greatly benefit from the stealing the idea or product, a customer who will be helped by the idea or product, or a partner whose own business would be complemented by your success? The other party’s interests should always be kept in mind. Also, be aware of who at the company you are dealing with. Dealing with the CEO is entirely different than dealing with a programmer or sales person. Remember to also consider the employee’s personal interests in having the information. For example, the head of product of development might think she would get a promotion if she presented your idea to the company as her own for a new product line. Risks of Exchanging Information: Confidentiality agreements can help protect the parties both receiving and disclosing information and are available as legal forms.

A surprising fact is that the party receiving information is often taking a greater risk than the party disclosing information. A good example of this risk is a movie studio. Script writers are dismayed to discover that studios not only refuse to sign a confidentiality agreement, but typically make the submitter sign an agreement stating that if the studio later develops something that looks like his or her idea, the submitter agrees not to challenge this.

Studios are in the business of coming up with ideas and making them into movies. Every time the studio receives a script or a pitch, it is receiving an idea. If a studio were to agree to keep this information confidential and that the submitter owned the idea, the studio would be subjecting itself to potential lawsuits for every idea submitted, even those already developed by employees who have never seen or heard of the submission. In court, the studio would have the burden of showing that despite the receipt of the submission, its employees who developed the similar idea never saw or received any information from the submission. This would be virtually impossible for the studio to prove and costly when multiplied by the huge number of submissions received. For studios, venture capitalists and other groups that work with large numbers of ideas, it may simply be too risky for them to sign a confidentiality agreement. Remember that in these circumstances you are usually the less powerful party and thus the other side forces you to assume more risk. Be sensitive to these considerations when you are disclosing to a competitor, by signing the confidentiality agreement you present, a competitor is risking a law suit from you even if it already knows, or has in development, what you are about to tell them.

For the disclosing party, the risks can also be great. The disclosing party risks (a) disclosure of such information to its competitors; (b) disclosure of the information to the public; and/or (c) use of such information to compete or gain market advantage against the disclosing party.

How do you transition from employment to self-employed entrepreneur without losing your shirt? That is a fundamental question. If the business you want to start allows it—not all of them do—many people test the waters first by starting the business with limited funds in their spare time. Consider this option: ask yourself whether you could try it, does your employer allow it, and would it work? Some personal service businesses can work like this, but many cannot. Think about that first, for your business.

If you have a business that requires outside start-up investment, then you have a harder climb uphill. First you have to convince investors to buy into your business plan and invest with you, so you get the money, and then you can start the business. In this case your starting salary is funded by the investment, and has to be agreed upon by you and the investors, and it is negotiable. The more risk you take, the happier your investors, because they want to see you really committed. They don’t want you to suffer, they need you to survive, and even prosper, or else the business also fails, but they also don’t want to risk their money on the new business and make you too comfortable at their expense. Your present earning power is an important piece of information. On one hand, you will have trouble living on less and they know it. On the other, it is hard to ask an investor to put money into improving your lifestyle. Another point is equivalent salaries. Sophisticated investors have a sense of what is appropriate for what job description, in what industry, in what region; and if they don’t know, they research it.

The last point I’d like to make is that you should understand that there is risk. Few people have started businesses without taking that risk. It’s built in. You have to be sure you can take it. I can’t tell you how others do it without taking the risk, because I think most everybody who owns a business takes that risk all the time. Make sure the returns are worth it, or potentially worth it.