Advice on starting your own business

I wrote this little essay some years a go as advice to someone who was thinking of starting their own business. It still seems like pretty good advice to me.

As a fellow entrepeneur, here are some odds and ends of advice. It’s free and worth every penny of it.

There are a number of good books about starting your own business. Check out your favorite bookstore or library. They will tell you about the common traps and mistakes.

Get the paper work right. Incorporate. Don’t commingle funds (that’s mixing your personal and corporate funds.) Once you have employees you need an employer ID number from the IRS — get the forms from your local IRS office. Don’t screw up with the IRS; if you can’t deal with government forms find a good accountant (you will want one anyway if things go well.)

Most personal startups fail. Don’t be discouraged by this — the reason is that they make very obvious mistakes. The success rate for people who have their act together is quite high. It’s about 80% in each case.

Be prepared to work inordinately hard. It comes natural once you get in the middle of running a business. If your hobbies/family/sloth are a big part of your life that come first, you are in trouble. Expect to be an obsessive/compulsive about your company for the first few years.

Ask for the sale. Remember the old adage, “A trained gorilla can be a star salesperson if you can teach it to ask for the sale.”

If you are starting a low capitalization startup you are going to have to work around the fact that you don’t have money. Improvise. Accept the fact from the beginning that you won’t have resources that you take for granted in your dull-dull-dull job at Megalithic Corp.

Hustle.

Scratch.

Pick a business that you understand. Low tech is easier than high tech. Artsy crafty can be deadly, but don’t rule it out. Think about what people need and not just about what you want to do. It helps if what you want to do goes with what people need. Sample business idea — the people who come in and clean your house in a two hour flurry once a week.

Always remember: Where is the money going to come from? Who is going to spend it?

There are really two kinds of businesses, service and product. Service is easier to get into, more reliable, and harder to make big money at. Product needs more formal business structure.

When you are starting it’s natural to take in money from any where you can get it. Quite often it’s the right thing to do when you’re in a startup mode. Later on it can be deadly — a sale can really cost you if it sucks up scarce resources.

Figure out what you can do well and concentrate on that.

Know what business you are in.

The more advice you can get, the better. Advice from people who have met a payroll is worth a lot more than advice from well meaning friends.

You have to understand at least a little bit about money. What is the amount of capital you need for your chosen business. What are your running costs going to be. Remember Mr. Micawber.

Don’t get a big head when you have your first round of success. You can’t quit working hard and being tight with the dollar until you have a bunch of people under you who are working hard and being tight with the dollar. The country club will get by without you.

The government will give you, free, a bunch of pamphlets about starting a small business. You may as well get them — they aren’t worth a whole lot, but it’s something. You should know what’s in them.

Talking is not doing.