J. Glerum wrote his final law school paper on music-sharing Web site Kazaa, spent a few months working at law firms, and then in 2005 left the legal world behind to start his own dot-com: Boise-based Check a Biz. Consumers can use the site to comment on local businesses, and businesses will be able to buy monthly subscriptions to find out when those comments are particularly good or bad. Now Glerum wants to expand and needs to raise capital to do so.
GOAL: To raise $500,000
GAME PLAN: To help Glerum achieve his goal, BusinessWeek SmallBiz turned to Jovita Honor, CFP and principal at Prialta Advisors, a fee-only financial advisory firm in Palo Alto, Calif., and Korey Boals, CPA and tax manager at Sarvas King & Coleman in Phoenix. The advisers agree that before Glerum can raise money, he needs to shift his focus from software development to attracting businesses. "The focus should be on getting businesses signed up," says Boals. Although the business has yet to get revenues from subscribers, it brings in about $1,000 a month from a licensing agreement with a local directory services company that uses Check a Biz' ratings to recommend services.
Glerum plans to begin selling monthly subscriptions in June. He projects that he can sign up about 30 clients a month. But Boals says that is too aggressive. Instead, he suggests that Glerum target businesses for which Check a Biz already has reviews—2,229 as of May—and estimate how many might sign up. He can extrapolate from that number to set a new goal. If Glerum can sign 10 companies each month at $50 to $60 a subscription, he could hire a salesperson at $5,000 a month in salary and commissions by the end of the year. Boals says signing up 120 customers, which would bring in $6,000 a month, would be a "good 2007."
Once the startup becomes cash-flow-positive, Glerum can begin reinvesting in software to provide better analytics to subscribers. Assuming Check a Biz builds a good presence in Boise, it should be able to expand into new markets by the end of 2008, says Boals.
Meanwhile, Glerum needs to find capital. Without a track record Check a Biz can't get a bank loan, and it's too young for most venture capitalists. Right now, Glerum owns 51% of the business. About 30% of remaining shares are owned by Glerum's co-founder, who developed most of the technology, and Glerum's father.
Glerum has had some discussions with potential angel investors, but without results. Honor suggests that instead of asking them for money right away, Glerum should invite them to serve on his board of directors. "That will help build the relationship and get them comfortable with the idea. Plus, he'll get advice," says Honor. The downside, Boals says, is that "you end up giving up control" if the angels do invest.
Glerum is willing to take that risk. "I'd rather have a small slice of a big pie than a large part of a small pie," he says. "I'm looking for money, but even more, I'm looking for the experience of an investor." Glerum says he will start doing sales calls in June and is hiring a $5-an-hour intern (the student's school provides additional payment). He thinks that signing up 240 subscribers is a reasonable goal, especially since businesses can sign up online, eliminating many face-to-face meetings. "If we get 100 businesses by the end of the year, I'll be happy," he says. "I don't think we need more to prove the concept."
As far as waiting until 2009 to expand into new markets, Glerum is not convinced. "If we are successful in Boise for a year, we'll be more than ready to go by the middle of 2008," he says. "We're trying to move fast. It's all about whoever can get the most consumers rating services first."
By Virginia Munger Kahn