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BizPlanIt recently spoke with Teri Spencer, Co-Founder & CEO of Ephibian to gain her insight into business planning, raising capital, and successfully growing a technology company. Ephibian is a global Internet services firm specialized in infrastructure, application development and managed services for Fortune 1000 and start-up companies. Ephibian¹s clients include AOL, Asimba, AT&T, eBay, Contest.com, OurHouse.com, Sears, theonline401k, UUNet and Bell Atlantic.

BizPlanIt: How did Ephibian get started?

Spencer: Unlike most start-ups, we were fortunate in that rather than banging on doors for funding, funding actually came banging on our door. For nearly a decade our team built large systems for the army, and one of our equipment subcontractors kept pushing us to give up the government work. After six years of prodding us to shift our resources to the commercial world, our military command shifted from Tucson to New Jersey, and we decided the time was right for a change.

We were introduced to a well-financed Swedish group that manages a holding company with over 250 operating entities. We flew to New York to meet with their management team and they offered us the opportunity refocus our skills to the commercial world. We jointly developed a dozen business plans with their team and worked together to decide where to focus our efforts. After reducing the choices to three business models, the Swedish group agreed to provide funding to back our team and get us started. Everything moved rather quickly, and the partnership has turned out to be extraordinary.

BizPlanIt: When you met with this group to review the potential business plans, it sounds as though they were more interested in investing in you, your team, your capabilities, than in any particular business model. Was that the case?

Spencer: Absolutely. We discussed the alternatives, the marketing and the various aspects of each business, but they essentially said not to worry about those areas, and that those things will follow the technology. They felt our team had achieved phenomenal things in a short period of time and that they were more interested in ³funding our team.

BizPlanIt: How has your business model changed as the company has grown?

Spencer: Until a year and a half ago we were rather general in the technology solutions we offered our clients. Working for the government can make you accustomed to large and unfocused projects ­ our responsibilities covered the entire technology spectrum from communications to processing systems to software applications to databases to security, etc.

When we launched Ephibian and made the shift to the commercial-side of the e-business, we stopped trying to be all things to all people like a lot of other e-business consulting firms. We decided to focus on back-end issues including application development, integration and management services where our core competency was, and to leave front-end and strategy consulting to others.

BizPlanIt: As your business model changes, do you put the company through formal business planning and strategic planning exercises? Or is the process more informal?

Spencer: I view it as a little of both. We conduct yearly meetings with our parent company and the other presidents and CEO¹s from the holding company. We all meet to discuss and share our ideas and high-level strategies. In addition, our management team receives coaching from our holding company and board of directors on a quarterly basis. Our team is continually watching the market, and two to three times a year we take a formal look at where we are and what our next steps will be.

BizPlanIt: I understand your company actively takes equity positions in select clients.

Ms. Spencer: Yes, we do. Ephibian provides technology services in exchange for equity, and we also help those clients raise additional funding as needed. We help ensure their business plan is investor ready and introduce them to our contact base.

BizPlanIt: What is your methodology for selecting these types of clients?

Spencer: We are very selective in which clients we choose to offer an equity opportunity. Most have already achieved various levels of funding, but we also work with some un-funded companies if we have a strong belief in their idea, and more importantly, in their management team. We also look for strong referrals. This philosophy has paid off well for us.

For instance, one company we are working with was a Garage.com incubated company that we worked with on a blend of cash and equity. The equity stake puts our skin in the game and tells the client we are not just there to collect fees, but to intimately assist them in their success.

BizPlanIt: What are the biggest weaknesses you¹ve seen in the business plans that cross your desk?

Ms. Spencer: The management team. Many management teams simply have no functional experience in the business and market they plan to enter. They may have a good idea, but they haven't worked in the industry and may not truly understand it. We also see plenty of business plans where entrepreneurs believe that no-one else has their idea, or that there is no competition. Often the plans I review are blurry in terms of how they propose to actually make money with the venture.

BizPlanIt: What have been the major challenges in growing your company?

Spencer: The challenges we have faced relate to getting the processes in place from a personnel standpoint. The technical perspective was everything we knew, and getting the proper structure instituted to attract and retain staff was the true challenge. We felt strongly about maintaining the culture of the company as we grew. This was very important to us as a management team, and we received invaluable assistance from our parent company in this area.

BizPlanIt: What suggestions would offer entrepreneurs of early-stage companies?

Spencer: Stay focused. Don't try to be too many things to too many people, or you will start scattering your resources. Focus is probably the most important component in making a business succeed or fail. Concentrate on the end goal and don't be afraid to go against the norm. When we shifted from a broad focus to a more narrow core competency, many felt it was an unwise move. But over the past nine months, as the shakeout has begun, we¹ve found that specialty shops with a focus are the ones still standing. Be passionate - it¹s easy to claim you're a startup, but far more challenging to live through it successfully.