|Last updated: 9/2/2002; 8:07:18 AM|
Marketing 101. Consulting 101. PHP Consulting. Random geeky stuff. I Blog Therefore I Am.Marketing 101 : General Comments On Starting Your Own Business
I ran into this url recently:
(and, no, I didn't have anything to do with his choice of pictures save appreciate them)
And I thought "Ouch!!! Let me give this dude some advice (he's a friend)" so here goes. Since his style was kind of random, I wrote it as if I was responding to an email from him. It just seemed appropriate. My responses start with [SJ] and are indented.
This week has been hell. I've been looking at starting my own business, with a couple of friends, but I feel like its all just going too fast. I make a pretty decent living, but at the same time, don't really enjoy working at the company I work at. It's sort of odd, having a good job at a badly run company. (I work at a company that I have no doubt would be all over fuckedcompany.com if we were slightly bigger, or more publicly held).
[SJ] I'd be very, very careful here. Thanks to the wonders of the media, the business press and the dot com era, we all (heck, myself included) seem to think that a job, any job, has to be infinitely fulfilling or we should bail on it. In a perfect world that might be true. In a bad economic environment, that's just not true – by a long shot. Right now you need to be glad to just have a job. And a job at even a badly run company is still a job. There are lots and lots of people that would kill for a full time job right now.
Anyways, I've been looking at a bunch of resources for starting your own business like the SBA's website, BusinessTown and the ABCs of Small Business, but I just don't have enough time to read everything that's available. I have so many questions about the ways to organize your business, how to do things like simple accounting (should have paid more attention in college, shouldn't I have) and other questions that are almost too numerous to name.
[SJ] You're doing the right thing man – just blog your concerns and someone in ye 'olde blogosphere is bound to pop up and help address them – or just the process of blogging them might help.
All of these questions swimming around in my head and at the same time I'm just not sure that I really want to quit my job right now, and start a business with no guarantees of income, some distrust of my potential partners and my own abilites and our dedication. At the same time, it looks like a great time to start the business that we're looking at, because the main players in that realm are probably all worn out from the past 2 years or so of crappy economics, and having run their own businesses full time for the past couple of years. I know we can be successful, but am not sure right now is the right time.
[SJ] Oh boy! There are so many issues in this one paragraph that I'll need to revert to everyone's favorite item – the bulleted list.
- If you have questions about quitting your job, that's a good sign that your "subconscious" or "intutitive" side may be trying to tell you something. Or it could be fear. Do the whole long walk, soul searching thing and try and divine an answer. Bear in mind that we probably still have 12 to 18 months of hard economic times ahead and if you leave your job you may not be able to get another or one as good.
- No guarantees of income? Yikes and Double Yikes. I'd strongly encourage you to find out, in advance of product development, if people will pay. Bear in mind that the high tech customer's threshold of pain towards paying is higher than ever and getting higher all the time. Try mocking up the product or service extensively and then put together your pricing and product literature and see if people will buy. See if you offer a 50% discount if they'll sign on the dotted line.
- Distrust of your partners? That's a deal breaker for me. Flat out deal breaker. The way I look at it is any startup business becomes a relationship as intimate as a marriage. If not closer. You wouldn't get married to someone you distrusted, would you? Well, perhaps, but raging hormones aside, you probably wouldn't. So, if you accept my thesis on intimacy, why in the world would you get in bed with a partner you didn't trust fully?
- Your own abilities. We all suffer from self doubt from time to time and this doesn't scare me in the least. Most of us will rise to the challenge time and time again. Just use the classic engineering problem decomposition approach – if you can't solve it, solve the part you can and then a bit more and a bit more until you are done.
- Dedication? That's a bad thing. Everyone needs to be very, very dedicated in a startup, particularly in a bad economy. That kinda goes without saying. Bear in mind that new businesses are hard and, in the beginning, everyone has to be super dedicated to get it going. That's the whole idea of "sweat equity".
- I do agree that, confusingly, down economies are some of the best times to start new businesses. As long as you don't need much in the way of revenues, the fact that everything is SO much cheaper is fantastic. But, while the other players may be worn out, that doesn't mean they are dead in the water – often times they will fight like demons to preserve what they have.
There just doesn't seem to be enough time in the day to learn everything I want to learn, and still keep up the appearances and efforts that my full time job requires…
[SJ] There never is. You also need to bear in mind that you have an obligation to the person paying your salary to give them what they pay you for.
- I'm not saying that you can't or shouldn't start a business on the side but that, even if they are dumb as rocks and running the company badly, they still pay you a salary and you should do a good job for them.
- Get really, really aggressive about time management. Most things can be done more quickly than you guess if you try.
I guess I'll just keep grinding away, and keep looking for more information. If you have any good resources for 'why should should be an LLC vs. an S-Corp or C-Corp?' or 'how to form a partnership where everyone doesn't have the same amount of capital to invest?' or 'how to do simple accounting when there aren't any employees but the owners, and they'll all get paid sporadically for 6-12 months?' I'd appreciate your leaving a URL in the comments.
[SJ] Ah… The old C versus S debate flavored with a touch of LLC. This is an oldie but goodie. Start by surfing over to www.bizfilings.com and checking out their stuff on this. It's really excellent.
- If you are bringing in venture capital or really any investment capital other than your own then you want to do LLC or C, not S.
- A C can be converted to an S once and vice versa.
- An LLC is a different beast and has to be setup specifically as an LLC.
- Investors generally always require preferred, not common stock. An S corp can only have a limited number of investors and a single class of stock so that means its not right when you have investors.
- Investors want preferred stock, not common, because in the event of an acquisition, preferred stock has to be settled first, before the common stock. I.e. the investors get paid off before you do.
- If not everyone has the same amount of capital to invest but everyone wants equal ownership shares then treat it as if the partners with less funds have a debt to the business that has to be paid off with interest before all their shares vest.
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