For starters, customer investors tend to be more engaged, according to Isoft Data Systems CEO and founder Matthew Wegener. Wegener’s company has several customer investors, or “investomers” as they’re sometimes called. According to Wegener, his investomers’ attachment to the company leads to networking and sales opportunities for Isoft.

“It makes it fun for them to talk to other people about your business and your software just because they have a sense of pride in ownership,” Wegener said. “It opened a lot of doors for us.”

In addition to the money and the sales bump that investomers can provide, they offer value to entrepreneurs in other ways as well. For example, the product feedback that investomers give can be one of the most beneficial parts of investomer participation.

“Our investomer brought industry-specific insight to our product that made it extremely effective at serving their business needs,” Lyconic co-founder Aron Filbert said. ”Our combined success eventually brought us relative income stability and huge growth potential through their franchising model.”

Since investomers are actually using the product they’re investing in on a day-to-day basis, their feedback is honest and comes often. Where a dissatisfied customer might just shift products or services, a customer who is invested in the company tends to be more loyal to the brand and would rather see it change to suit their needs. This push toward serving the customer can not only make a business more responsive to its customers’ needs, but can also lead to it being more in touch with its marketplace in general.

But as with any form of investment, using investomers is a thing to be done with care. Because of their stake in the company and their direct relationship with the product, investomers can also be a major headache.

An investomer’s ability to use leverage to influence direction of the company and tailor the product to suit his or her needs as a customer can be a good thing, since what is good for one customer can often be good for another – but only up to a point.  

If an investomer requires exclusivity of a product that is marketable to a broader spectrum of customers, for example, the investomer’s needs can produce a conflict of interest that can poison the investor-entrepreneur relationship and put a company in peril.

One solution to the exclusivity problem is simply to charge for it. If exclusivity is going to load a big opportunity cost onto an entrepreneur, then perhaps the investomer should pay a premium.

“We do not do anything exclusive for customers unless they pay us time and materials, handsomely, for doing something that’s specific to them that we won’t use for the rest of the industry,” Wegener said.

The flip side of this coin is when investomer influence drives a company to find new marketplaces and new applications for its products. This was the case for Isoft when it adapted its data management system for used truck parts to managing truck sales, new parts, re-manufacturing and repair work at the behest of one of its investomers.

“They were a fantastic partner,” Wegener said. “We developed a whole new product with them.”

While exclusivity can be made to pay – and in certain situations, there is no choice but to give up a large stake of the company in order to save or even start the business – these things should generally be avoided unless there is ample justification to the contrary.

Clear right and wrong answers are hard to come by in business, and you won’t find any here as to whether or not you should use investomers. On one hand, the brand loyalty, product feedback and increased customer referrals are attractive benefits to using investomers. But on the other hand, entrepreneurs need to be careful about letting investomers use their leverage to cajole them into putting the needs of the investomer before the needs of the business.

Every entrepreneur’s situation is different, and in the final analysis it comes down to knowing what is right for your business. In the right situation, using investomers can be both rewarding and profitable.

Roundscapes CEO Christopher Kingsley can attest to that. His company’s relationship with its investomer, Landscapes Unlimited, has done everything from improve his company’s workplace culture to providing Roundscapes’ with a much larger and more diverse business pool than it would have ever had without the investomer.

“Without Landscapes Unlimited as both an investor and a client we would have failed years ago,” Kingsley said. “Probably our three biggest clients that we have now ultimately came out of work that we were doing for our investor’s company.”

With farmers’ markets blooming and themes of “Go Local” sweeping grocery stores, it is prime time for budding food entrepreneurs to showcase their product’s originality or promote grandma’s best recipes. Luckily for Nebraska food entrepreneurs, the nation’s only extensive food entrepreneur assistance program is nestled in their own backyard on the University of Nebraska-Lincoln’s East Campus.

The Food Entrepreneur Assistance Program, within the Food Processing Center, is the ultimate source for assistance through all phases of establishing a food business. After attending the “Recipe to Reality” seminar, a workshop providing entrepreneurs with a basic understanding of crucial issues in a food business, the individual is ready to begin “Product to Profit.”

The product owner meets with consultants one-on-one, taking about a year to complete the program. The program helps to uniquely tailor each entrepreneur’s creations by providing insight into the food industry and promoting a competitive edge within the marketplace.

Jill Gifford, Manager Food Entreprenuer Assistance Pgm

Program manager Jill Gifford said “Product to Profit” provides professional input the entrepreneur may not have considered. Taking a product to the market is more than slapping a name on a jar and giving it to the store for sale. The food industry has many requirements and regulations a product must meet before being sold in stores.

“It helps them to think about everything, and it helps to prevent mistakes such as getting labeling incorrect with the FDA,” Gifford said. “Any small business takes a lot of work; the food industry is all very regulated. Our services provide help with this to make everything easier.”

The program team of food industry experts, including food scientists and business consultants, counsel the individual in business development, product development, labeling and regulatory compliance, processing facility location, product pricing and promotional material development. The team works for the success of the food product by advising the entrepreneur to make educated decisions including proper planning and execution. This personalized form of food business counseling is not limited to Nebraska residents alone.

“It is the only center in the country that is this extensive, which is why we get companies from all over the country. It is a unique program,” Gifford said.

Julie Reiling, Food Scientist, Sensory Analysis Lab Panel

Not only does the program provide insights into the complexities of owning a food business, it also looks to give new food products the upper hand in being competitive. According to Gifford, in the food industry it not only takes a great idea, but great marketing, promotion and business concept to survive. “Product to Profit” strives to implement these intangibles to enable the prosperity of the product.

“There is a lot of competition,” she said. “It takes a competitive edge to be successful. Have a really quality product, have quality packaging, have a willingness to market and promote so the consumer understands the uniqueness of the product.”

Local food entrepreneur James Gustafson has found “Recipe to Reality” and “Product to Profit” to be invaluable in the creation of his food endeavors with Pur Java, a coffee product.

“The [Food Processing Center] is a gold mine of expertise and knowledge that can be utilized for any food industry questions.  The resources that are available from marketing outlets, production issues, nutrition information and labeling are all areas of knowledge the FPC can answer for anyone starting a new food-related business,” he said.

Whether the food entrepreneur is a Nebraska native or a resident hundreds of miles away, the Food Entrepreneur Assistance Program puts companies on the right track. According to its website, FPC prides itself on the ability to take “ food from thought” to “transform ideas into reality with passion, flavor and innovation.”

[For more information about the UNL Food Processing Center, check out their Resource Listing right here on NebraskaEntrepreneur.com.]

“This year we had over 50 competitors from all over Nebraska.  We’ve had a good diversity of students and we’ve grown over last year, so were excited about that,” said Travis Pillen, graduate assistant for the Nebraska Center for Entrepreneurship.

Students used their presentation and communication skills to present their idea to panels of industry experts from across the state and received feedback to further develop their idea. According to organizers, the event has nearly doubled in terms of interest and spectators. It was estimated that 300 people attended this year’s competition.

Five winners each received $1000 to further pursue their idea.  The Nebraska Center for Entrepreneurship continues to work with students following the event.

“We continue to track the students as most of them are still in classes. We follow up with them and continue to provide any type of assistance they need,” Said Kathy Thornton, director of the Nebraska Center for Entrepreneurship.

Students who participated stressed the importance of the judges’ feedback in this process.

“All of the judges give insanely good criticism. It really helps you prepare for the real world,” said Tanner Odell, a junior enrolled in Lincoln Public Schools Entrepreneurship Focus Program.

Taylor Ford, a sophomore at the University of Nebraska-Lincoln, said, “This has been a valuable experience. I got some feedback and was able to make some connections with other entrepreneurs that could help me out in the future.”

The following winners were announced:
Beth Barmetler, University of Nebraska-Lincoln
Kyle Powers, University of Nebraska-Lincoln
Jason Kruse, University of Nebraska-Lincoln
Ryan Cairns, Southeast Community College
Madison Gifford, Lincoln Public Schools Entrepreneurship Focus Program

Other news from the event:
Quick Pitch Competition awards five student entrepreneurs $1k (Video)
Idea to sale in 3 minutes

Tschauner has first-hand experience with the challenges small businesses face. Tschauner is a small business owner herself, and her knowledge in entrepreneurship has helped her create workshops through Central Community College that guide entrepreneurs to success.

The workshops bring together participants, professionals, mentors and Tschauner as the instructor for an eight-week program (one workshop, 10 individual sessions) called “Becoming An Entrepreneur: Starting and Developing Your Small Business.” Tschauner believes this program helps entrepreneurs take appropriate risks and figure out how to take the next step.

“Being an entrepreneur has helped me a lot,” Tschauner said. “I understand the biggest hiccup. That’s where I myself have gotten hung up. I don’t have that trait of being a risk taker and I’ve seen that with a lot of people.

“When people are at that point whether they should take it to the next level or let it go, that’s a scary point. I’m very familiar with that.”

According to Tschauner, the workshop’s focus is on starting and developing a small business. If it’s just an idea, the workshop focuses on how to transform ideas into feasible plans. From that point, the program then focuses on development by highlighting different organizations available to help startups get their footing. Other topics include how to find investors, business ventures and forecasting sales. The program also covers branding and logos and an overview of legal issues. By the end of the workshop, aspiring entrepreneurs have business plans ready, Tschauner said.

“You’re going to have everything you need,” Tschauner said. “It’s a one-stop shop. You’re given information on insurance, revenue. We’re actually doing a live webinar for our workshop to talk about sales tax. We have an attorney who comes to the class and they also made that connection. You’re in a comfortable, friendly environment.

“Everyone is in the same stage where they can ask questions. They love the networking not only with each other but with the guest speakers that come to class. That’s invaluable. We take breaks just for collaboration. It’s just a comfortable environment.”

The workshop interfaces with other parts of Central Community College, including art students making and designing brands, IT students building websites and photography students taking promotional photos. College credit for the workshop is also available. The course takes place in Hastings, but Tschauner said anyone can participate. Most of the speakers are from the Hastings and Grand Island areas.

In the spring session, 13 students participated and this fall semester saw 12 students. Tschauner said the smaller numbers are assets for a program like this since fewer participants are easier to maintain.

For Tschauner, the program was more than just an opportunity to teach about entrepreneurship. Tschauner created the entire program herself as a master’s degree project, and because of her own experience as an entrepreneur and her work with NETForce (Nebraska Entrepreneur Task Force), she’s been able to provide first-hand advice to participants.

For more information on Central Community College’s entrepreneurship workshops, contact Lisa Tschauner at ltschauner@cccneb.edu

NUtech is a non-profit organization affiliated with the University of Nebraska. The company was founded in 2009 and since then has worked as the liaison between the private sector and the University. The company’s main purpose is to provide local entrepreneurs with both ideas and a network of professionals with experience in business development, intellectual property, legal, and marketing dedicated to helping an idea become a business opportunity.

David Conrad (photo courtesy NUtech Ventures)

“Sometimes people have a difficult time accessing the services and mentors they need to launch a successful startup. Our job is to connect them with the best people and resources,” said David Conrad, executive director of NUtech Ventures. “We’re the people who bring the groups together–sort of a platform if you will.”

And anyone in the private sector can use NUtech.

“We have a pretty unique source of networking and knowledge of intellectual property,” Conrad said. “If your business is focused on technology, we have a lot of expertise. I think we’re relatively unique in Lincoln in that respect.”

In the final analysis, successful university technology transfer is about job creation. “The whole reason for doing this is economic development,” Conrad said. “Now that we are in an economic downturn, entrepreneurship seems to be the trend and right now, innovation seems to be the big buzz word.”

For more information on NUtech Ventures, visit their website at www.NUtechVentures.org.

This guest post was contributed by Todd Furasek, Vice President, Commercial Loans at Union Bank & Trust Company.

It is very important that someone interested in owning a small business finds a business related to something he or she enjoys. A small business is a ton of work and if you don’t enjoy what you are doing, it will be very hard to spend the required amount of time there. The rewards of owning a small business can be tremendous for those willing to put in the time and sweat to make their business a success. If you believe you are up to the challenge, here are a few tips on financing your business.

How to Finance Your Business
There are several different kinds of funding available to small businesses. The funding type is often determined by the preference of the owner and the types of funding available. Many times the owner will fund all or part of the start-up costs from personal assets, by borrowing the funds personally, or by obtaining money from friends and family. Some business owners will trade ownership in their company for funds to be used for start-up or further development of an existing business. Other owners obtain grants or traditional bank financing for their business needs. Most banks offer an array of business loans, some of which are backed by the United States Small Business Administration (SBA). SBA loans offer banks a partial loan guaranty for funds. They extend to qualified business borrowers who wish to start a new company or to grow and expand an existing business.

Understanding the Lending Process
There are several ways during the application process that lenders determine whether they can or should approve loans for a small business. A lender will first assess the personal financial status of the prospective business owner or borrower by looking over his or her personal financial statement, credit reports, savings and investment statements, tax returns, and other personal financial information. The lender will attempt to determine whether the borrower is qualified to operate the business and will look at experience and track record to assess the candidate. A portion of the total cost of the business start-up or purchase must be contributed by the borrower. Lenders will look at what the borrower is contributing to the transaction so that the borrower will also have an amount of capital at risk. A collateral analysis will be performed to determine the borrower’s ability to guarantee the loan with tangible assets as a secondary source of repayment. Personal assets of the business owner may be used to secure the loans of the business if they are available. The hardest part of a lender’s job is determining the character of a prospective borrower. This may be the most important part of the lending decision because if the borrower does not demonstrate integrity and trustworthiness, any loan proposal will be declined.

Available Funding

Currently small business loan rates remain relatively low. The rate a bank is willing to offer depends on many variables, such as the term of the loan, the creditworthiness of the borrower, collateral, and ability of the business to repay. In general a borrower can expect to pay between 6 percent and 8 percent for a traditional small business loan.

The availability of funding for small businesses is very important to the economy especially in down times. Right now banks are asking more questions and getting to know their customers better. With new businesses being started every day, SBA loans are a very important tool that banks can use to help business owners obtain the funds they need.

Developing a Business Plan
If you or someone you know is looking to obtain loans or grants, they should focus on developing a good business plan. Banks and other investors want to know that the owner is capable of running a business and is qualified. Owners need to take advantage of help that is available to them, which is generally free of cost. The Nebraska Business Development Center and the local SCORE Chapter are both excellent organizations available to small business owners, and both offer free services.

“One of the things that we can provide is that there’s only so much time in the day and there are a lot of services around,” Simonsen said. “I look at our job as being more of one of being to get people to the resources they’re looking for. We are continually networking and making sure we know who’s doing what.”

Simonsen believes any startup faces challenges but some of the hardest hurdles to overcome lie in marketing and networking. In rural areas, the challenges are even greater compared to areas like Omaha or Lincoln.

“Making their presence known is one of the main struggles, as far as the type of businesses you might find in Norfolk,” he said. “If the market is there for the business, I think there’s a lot of advantages in the standpoint of cost to getting it up and going.

“The biggest hindrance is the lack of information and lack of knowing where to turn next. That’s what I see as a hurdle to get over and it’s just a continuous process.

The EVEDC started as an effort to promote economic development in the counties of Madison, Pierce and Stanton. The primary city in these counties is Norfolk. These three counties rely heavily on each other for continued growth and the EVEDC’s purpose is to promote the businesses through their various programs.

In its early days, the services of the EVEDC focused on four counties but later was narrowed down to three. The Elkhorn Valley Economic Development Council was formed in 2001 and as of 2009 has 13 members in the three county area.

“We initiated a partnership with Norfolk to bring people back to the region and the entrepreneurial development,” Simonsen said. “We try to utilize the existing programs that are available. Rather than recreating what’s already there, we chose to go that route.”

The services provided by the EVEDC are broken down into services for communities and consulting services for startups and small businesses. They provide planning, recruitment, marketing, development and networking guidance to startups, among other services.

Simonsen said northeastern Nebraska isn’t immune to the challenges of the economic recession but small businesses continue to form and thrive in the region. Simonsen said there have been mixed results in Nebraska with small businesses.

“In some cases [the economy’s] held some people back,” Simonsen said. “We’re still seeing a lot of startups and we’re still seeing a lot of service and retail startups and the actually true entrepreneurial development has been a little slower than it once was but I’m seeing a trend that it is picking up and I’m expecting [a continued] increase.”

“[Grow Nebraska] focuses solely on marketing,” said Jannell Anderson Ehrke, CEO for Grow Nebraska. “We provide entrepreneurs with marketing tools, promotion and awareness. There are wonderful organizations that help do things but we focus on marketing.”

Grow Nebraska is a statewide organization established in 1998. It provides several options for its members, including a store for Nebraska-only merchandise in malls in Kearney and Grand Island as well as their website. Those who become members of Grow Nebraska are given the proper marketing tools but are also given a webpage located on the Grow Nebraska website with information about each member.

“Since we began, we’ve been dealing with product entrepreneurs – anyone is eligible as long as they’re a resident of Nebraska or their primary business is headquartered in Nebraska,” Ehrke said.

Typical marketing tools such as advertisements and demographics are key to a business’ success. However, Ehrke believes online marketing is another powerful tool that can enhance a business and promote sales. Using popular social media sites can enhance and expand coverage for any business or company. Grow Nebraska provided training on these social media methods in an effort to expand the marketing for businesses online.

Grow Nebraska store at the State Fair - photo courtesy Facebook

“Last year we provided social media training on Facebook, Twitter and YouTube with partnering with UNO [University of Nebraska at Omaha] extension,” Ehrke said.  “We’re hoping that we’ll do a similar platform that will be more on websites and online marketing. They need to wrap around this whole technology thing. It’s a real important part.”

Nebraska may have weathered much of the recession but Ehrke said entrepreneurs are still susceptible to failures if the owners neglect proper planning.

“I think we’re very fortunate because Nebraska’s a friendly state for startups,” she said. “It’s always good to have a plan. There are a lot of resources out there that are free or low fee to help do a business plan.”

Planning a business can mean anything from managing finances to finding the proper location to demographics but Ehrke said marketing is the key to success. The difference between success and failure can lie in how effective a company’s marketing is.

“The place I see most businesses fail is the marketing part,” Ehrke said. “It’s getting to making that connection to sell it to buyers. That’s where we try to fill that void and try to make those connections for them. At the end of the day, it’s all about if they’re making the sale and if they’re not making the sale.”

Information about Grow Nebraska, including tools on marketing, can be found on their website.