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MenuWhat would you do differently today if you were starting over with your business?
What are some of the biggest things you overlooked when starting your business? What did you wish you hadn't neglected (such as anticipated taxes or other expenses)? What activities did you do that you could have outsourced? What skills did you acquire the "hard way" that you would do differently now?
Answers
If I was going to start over, with a blank slate I would do several things differently.
1. I would hire an accountant and bookkeeper on day one. I know that on the surface it's easy to look at the cost of an accountant and justify spending those resources in other areas, however I have seen this play out horribly for a number of businesses (ours included.) An ounce of prevention is worth a pound of cure.
2. I would make a list of all of my start up items, edit it and then edit it again. Start as lean as you can. We started our t-shirt company with basic equipment in my mom's attic and slowly moved into proper production space as we needed to, however we made the mistake of buying too much equipment early on because we thought we needed it. Get by with the bare minimum for as long as you can, get traction, customers and cash flow and then expand cautiously.
3. Don't listen to salespeople! Talk to friends, other businesses and look on the web for answers to common questions. Salespeople are great when you know what you need to buy, however often times you are going to end up wasting money that would be better spent in other places, like on your accountant.
4. Don't take on bad customers just to make a buck. If you are interested in knowing our 10 tell tale signs of bad customers, schedule a call with me and I'll run down the list. It will save you hours and it only takes a few minutes.
5. Find a team of advisors and listen to them. I wish I would have listened to advice that people were giving me for free when we first got started. There's an old saying, "if you're the smartest person in the room, you're in trouble." Find good council and listen.
Hope that's helpful, I've been a freelancer and small business owner for almost twenty years and enjoy coaching startups and entrepreneurs in getting their ventures off the ground. Feel free to schedule a call and I can help get you started.
Ah, as the ancient proverb says, "When the student is ready, the teacher appears."
You ask the insightful questions that most entrepreneurs, myself included, neglect to ask, in advance.
I started a cellular retail store in 1989 with a partner. This was when the first Motorola flip phone hit the market. It cost us $3100 wholesale. Yikes.
We were friends. Unfortunately, even though the business recorded taxable profits in such a short time, we shut it down after about 6 months due to irreconcilable differences between us. We were both too stubborn, me maybe more than him. Lesson: being friends is not enough. 1. Partners need to be completely in sync philosophically. 2. I have had partners since, but will never do 50/50 again. There needs to be a leader/decision maker. If both or all the partners think they are the leaders, you are just heading for a crash. That is not to say that the leader is independent. But, ultimately, someone needs to break the tie and make the decision.
As for outsourcing, when you are bootstrapping you end up doing more tasks than you would otherwise. If you have the funds, outsource everything that keeps you from your core competences. But, never put the destiny of your company entirely in someone else's hands. Keep controls in place and keep close tabs on the money. Don't abdicate growing the business for running the business.
As for learning things the hard way, is there any other way? Seriously though, I have learned to listen to my wife. Had I listened to her "discernment" when I was younger, I would not have made as many poor decisions as I did. As for another lesson, I purchased a full service hair salon many years ago. No, I am not in that profession. It was purely an economic decision. I sold it one year later for more than double my investment. However, I could have done significantly better and had less aggregations had I fired the salon manager. She had convinced me that she could run the place better than the previous owner. Unfortunately, she also rallied all the employees making it difficult for me to turn the ship around. I did it in spite of her. And, the next owner did replace her. Now I understand why top level people are often, not always, replaced in acquisitions. It is a soft skill, but I am more keenly aware of company culture and the influence of leadership now than I was 25 years ago.
Hope that sheds some light. If you woul like to chat further, give me a call using the free call link below.
https://clarity.fm/kevinmccarthy/FreeConsult
Best regards,
Kevin McCarthy
www.kevinmccarthy.com
Related Questions
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How do you make money to survive while you are building a business? What are some quick ways to make money with less time commitment?
I love this question. If you have to work on the side while building your business, I recommend doing something you absolutely hate. That keeps you hungry to succeed on your own. You'll also typically save your energy for the evenings and weekends where you'll want it for your business. Don't expect to make much money at your "other job" but you can work it to pay the bills while you build your business. This approach also forces you to build incrementally, and it keeps you frugal. This is not necessarily ideal. Having a bunch of money set aside sounds nice and luxurious, but not having the resources puts you in a position where you have to figure it out to survive. I love that. I started my business eight years ago on $150 and today we do a million a year. Don't wait until you have the resources to start safely. Dive in however you can. And avoid shortcuts. Don't waste your time scheming to make bigger money on the side. Do something honest to live on and create a business that drives value.CM
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What advice do you give to a 16 year old entrepreneur with a start up idea?
First, hat tip to you for being a young entrepreneur. Keep it up! If you have the funds to build out your MVP, hire a developer and possibly a mentor. If your idea is marketable, you don't need to give up equity by bringing in a co-founder. If this is your entrepreneurial venture, I would recommend you do retain a coach to help you see all the things you may not know. Have you already done your SWOT analysis? Have you identified your target market? What is your marketing plan? What will be your operating expenses? There are lots of questions to ask. If you would a free call, I'd be happy to help you in more detail. Just use this link to schedule your free call... https://clarity.fm/kevinmccarthy/FreeConsult Best regards, Kevin McCarthy Www.kevinmccarthy.comKM
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Business partner I want to bring on will invest more money than me, but will be less involved in operations, how do I split the company?
Cash money should be treated separately than sweat equity. There are practical reasons for this namely that sweat equity should always be granted in conjunction with a vesting agreement (standard in tech is 4 year but in other sectors, 3 is often the standard) but that cash money should not be subjected to vesting. Typically, if you're at the idea stage, the valuation of the actual cash going in (again for software) is anywhere between $300,000 and $1m (pre-money). If you're operating in any other type of industry, valuations would be much lower at the earliest stage. The best way to calculate sweat equity (in my experience) is to use this calculator as a guide: http://foundrs.com/. If you message me privately (via Clarity) with some more info on what the business is, I can tell you whether I would be helpful to you in a call.TW
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What is a better title for a startup head....Founder or CEO? Are there any pros/cons to certain titles?
The previous answers given here are great, but I've copied a trick from legendary investor Monish Pabrai that I've used in previous startups that seems to work wonders -- especially if your company does direct B2B sales. Many Founders/ CEOs are hung up on having the Founder/ CEO/ President title. As others have mentioned, those titles have become somewhat devalued in today's world -- especially if you are in a sales meeting with a large organization. Many purchasing agents at large organizations are bombarded by Founders/ CEOs/ Presidents visiting them all day. This conveys the image that a) your company is relatively small (the CEO of GM never personally sells you a car) and b) you are probably the most knowledgeable person in the organization about your product, but once you land the account the client company will mostly be dealing with newly hired second level staff. Monish recommends that Founder/ CEOs hand out a business card that has the title "Head of Sales" or "VP of Sales". By working in the Head of Sales role, and by your ability to speak knowledgeably about the product, you will convey the message that a) every person in the organization is very knowledgeable about the ins and outs of the product (even the sales guys) and b) you will personally be available to answer the client's questions over the long run. I've used this effectively many times myself.VR
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How much equity should I ask as a CMO in a startup?
Greater risk = greater equity. How likely is this to fail or just break even? If you aren't receiving salary yet are among 4-6 non-founders with equivalent sweat investment, all of whom are lower on the totem pole than the two founders, figure out: 1) Taking into account all likely outcomes, what is the most likely outcome in terms of exit? (ex: $10MM.) Keep in mind that 90%+ of all tech startups fail (Allmand Law study), and of those that succeed 88% of M&A deals are under $100MM. Startups that exit at $1B+ are so rare they are called "unicorns"... so don't count on that, no matter how exciting it feels right now. 2) Figure out what 1% equity would give you in terms of payout for the most likely exit. For example, a $10MM exit would give you $100k for every 1% you own. 3) Decide what the chance is that the startup will fail / go bankrupt / get stuck at a $1MM business with no exit in sight. (According to Allman Law's study, 10% stay in business - and far fewer than that actually exit). 4) Multiply the % chance of success by the likely outcome if successful. Now each 1% of equity is worth $10k. You could get lucky and have it be worth millions, or it could be worth nothing. (With the hypothetical numbers I'm giving here, including the odds, you are working for $10k per 1% equity received if the most likely exit is $10MM and the % chance of failure is 90%.) 5) Come up with a vesting path. Commit to one year, get X equity at the end. If you were salaried, the path would be more like 4 years, but since it's free you deserve instant equity as long as you follow through for a reasonable period of time. 6) Assuming you get agreement in writing from the founders, what amount of $ would you take in exchange for 12 months of free work? Now multiply that by 2 to factor in the fact that the payout would be far down the road, and that there is risk. 7) What percentage share of equity would you need in order to equal that payout on exit? 8) Multiply that number by 2-3x to account for likely dilution over time. 9) If the founders aren't willing to give you that much equity in writing, then it's time to move on! If they are, then decide whether you're willing to take the risk in exchange for potentially big rewards (and of course, potentially empty pockets). It's a fascinating topic with a lot of speculation involved, so if you want to discuss in depth, set up a call with me on Clarity. Hope that helps!RD
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