Me and my great friend David, a talented political up-and-comer in Washington were discussing his (great) thoughts on a new business today. His one hesitation: “but how do you actually do it?”
Those words are stand-ins for the many anxieties new entrepreneurs think about. How do I get money to start? How should I format my business plan? What is FICA? When I started my business, I was afraid I might get arrested for missing one of the endless reporting requirements or regulations. Did I have the right minimum wage poster on the wall?
It turns out that it just doesn’t matter. Today, I trust Mary, our great office manager to get the details right. And if she doesn’t, I know that the consequences for a small business are trivial compared to not thinking about the right things. And I’d bet that many great businesses never leave their would-be founder’s heads because the details are too overwhelming.
Don’t get nervous about the details. Starting a business is easy, but error prone. It’s problematic because doing too much busy work is tempting before you have a real business. Endless plans, getting funded, strategic partnerships, market segmentation, feature-driven development–customers would never pay you to do these–they create no real value. Spending too much time here is deadly. At this stage, you have more important things to get worried about. Focus on starting a business that gets you to the stage that you can think about important things like an understandable product and paying customers as early as possible. (I’ll do a post on the important things soon). So, without further ado, here are ten ways to get started on the right track.
1. Get six months of salary in the bank. And don’t take money from anyone.
2. Find a friend to join your company for equity. If you can’t find a friend to sign up, your idea stinks.
3. Pick a name and register it as an LLC with (usually) your Secretary of State. Do some Yahoo (better name-matching) searches to make sure you’re not stepping on anyone’s toes. Stepping on toes at this point means a huge company with the same name, or a medium-sized company with the same name and industry, or a small company with the same name, industry, and geographic location. Good names represent the image you want to project as a company. If you expect to do lots of internet business, names that aren’t in the dictionary are easy to get to the top of search engines. Don’t worry about stock restrictions on LLCs, filing in Delaware, etc. If you get big enough to have these problems, you’ll have people lining up to solve them.
4. Register your domain name and get email accounts for everyone. Don’t even think about doing business without yourname@yourcompany.com. Get a simple two page website up. What you do for customers and how they buy it from you.
5. Pay $750 to an attorney to write mail-merge your operating agreement. Make sure you consider how things are handled if a founder needs to leave the business.
6. Get $10K in credit card limit for every partner in the company. Then, commit not to spend more than 1/3rd of this without hand-wringing, cheek pinching, and second jobs taketh out at Micro Center. Never, ever mix personal and business spending. Ever.
7. Spend $1K on business cards (for everyone-you should buy business cards for everyone even when you are hiring urinal paddy changers at your 60 story downtown skyscraper), stationary, and envelopes.
8. Make sure everyone has good laptop computers, a printer, and a professional to call when your technology breaks. Computer problems are a major productivity killer, and are a morale black-hole. Develop a relationship and invest in good tech.
9. Decide who has responsibility for sales, who has responsibility for operations, and who is the buck-stops-here boss. A new company without a President is like a ship without a rudder. And without an engine too. Early on, it can be a good idea to have the person in charge of sales also be the President. This has the positive effect of focusing the organization on customers. Later, it can lead to service delivery problems, but that is the topic of another blog post.
10. Find your first customer. The first customer is critical. Good for finances, great for morale, and the true litmus test of a company. If you can’t find the first, how will you ever find the second? (a common misconception is that the first customer is hard to find. It is actually true that the first customer is sort of hard to find, the tenth customer really hard to find, and the 1,000th customer only findable if you have a real business). For more on these type of effects, see Geoffrey More and Crossing the Chasm.
Well, that’s all folks. Drop me a line if you think I missed anything. And I’ll be getting a post about the important things soon.