So you're sitting in your cubicle, dreaming about starting your own business and being your own boss. Well, as any experienced entrepreneur will tell you, it's not easy-especially when it comes to learning the basics. There are dozens of loose ends to take care of in the early stages, from researching and writing your business plan to securing funding to insuring your company.
When it comes to your strategy, there will be some things you don't want do in haste only to regret later. Writing your business plan, for one. And you could end up being penny-wise and pound-foolish with some aspects of your business if you're not careful. So where should you take your time, and where can you save a bit of money without ruining your business before it even takes off?
A little bit of knowledge is key. "You can't be an expert at everything, but know as much as possible so you can connect the dots," says Heidi Krupp, 36-year-old founder and president of Krupp Kommunications Inc., a five-employee New York City publicity, marketing and consulting firm that she started with $5,000 of her own money.
Here's a rundown of a few business basics, with advice for connecting those dots better, faster or cheaper.
Start-Up: Do It . . .
Do It Better
There are always things you can do better in starting a business, aspects of your company that you should put a little more time into to avoid problems down the line. Here are a few:
- Researching your business idea: Scan background research reports and market forecasts, but don't rely on them solely. Go to meetings, forums, symposiums and trade shows, pound the pavement and, most important, listen. Think about your competition and the type of consumer who would want your product or service the most. "Talk to real customers. Make sure your product or service has value to them," says Tim Petersen, managing director of the Samuel Zell and Robert H. Lurie Institute for Entrepreneurial Studies at the University of Michigan at Ann Arbor. See our Starting a Business section for a host of tips on doing your diligence.
- Writing your business plan: "Everyone teaches people to write a business plan to raise money," says Jerry Mitchell, founder and president of the Midwest Entrepreneur's Forum in Chicago. "That's wrong. Write a business plan for how you're going to stay in business for 90 days." Short business plans are all the rage right now. That means a four- or five-page summary accompanied by a 20-page (maximum) overview of your product and market segment. There are tons of pointers online to help you write a better business plan. You can also check out bplans.com, which offers a lot of helpful tips, and of course, don't miss our Startup How-to Guides for a quick how-to.
- Setting up your accounting procedures: "People do things backward," says Philip Goldfarb, a partner with accounting firm Weisberg, Mol, Krantz & Goldfarb LLP in Long Island, New York. First, he says, hire an accountant who knows your industry and has time to dedicate to you. Second, decide on your entity type (partnership, corporation and so on), and have an attorney draw up your organization papers. Next, buy accounting software that fits your business model. The last step is putting your controls in place.
- Bootstrapping: You're sinking your own money into a new business without the help of outside investors. If you're lucky, your friends and family will advance you some cash, too. This is how the majority of U.S. businesses get started, but unfortunately, as every beginning entrepreneur knows, this seed capital is very limited. The trick is getting the most bang for your buck out of this bootstrapped cash. "You have to guard cash like it's king," Mitchell says. Of course, it's easier said than done. Luckily, you can bootstrap better with a variety of creative methods that keep your overhead low and improve your cash flow.
- Creating a budget: The success of your business depends on how well you budget. "Once you have a feel for what your revenues are going to be and how much business you're going to do, from that you should be able to design a budget," Goldfarb says.
- Setting up your management team: You need proven rainmakers to get your company off the ground. But you want to make sure you're selecting the right people for your business and product. Entreworld.org has many tips in its "Start-Up Resources" section, and don't forget to check out our article "Creating a Management Team."
- Keeping customers: Who wants a bunch of one-time customers? Keeping customers is something that any business can do better. Pick up some great techniques and tips at www.businesstown.com/internet/marketing-life.asp and www.wellsfargo.com/biz/bustips/tip/mktgsalesresults.html.
Start-Up: Do It . . .
Do It Faster
Some aspects of your business can be done faster, provided you know the shortcuts. Here are some tips for wrapping up some of the business basics more quickly:
- Finding an attorney and an accountant: This is actually the first thing you should do as you're starting your company. To speed up the process, be targeted. "Get somebody with background and experience in your particular industry," Goldfarb says. "Find a firm under 50 people, but where the partners, managers and seniors have big-firm experience." This way, you'll get more attention and cheaper rates from a seasoned pro. Online references that can help you get a step closer to the right professional include www.nationalbar.org and www.smallbizaccountants.com.
- Locating outside financial resources: You can easily spend all your time looking for money rather than building your business. "Raising money is time-consuming," explains Joseph Bartlett, a partner with law firm Morrison & Foerster in New York City and co-author of Raising Capital for Dummies (Wiley). It can be challenging to get early-stage money these days, Bartlett says, and many beginning entrepreneurs rely on friends, family, loans and their own resources until they reach a certain size. But if you're bent on obtaining some outside funds, you have to know what you're looking for to make the process go faster. Angel investment is one option. Online resources such as www.moneyhunter.com will help get you up to speed. Contact your local chamber of commerce, business development groups, universities and entrepreneurial forums for help in locating outside investors in your area. Depending on your type of business, you may qualify for an SBA loan, too. See www.sba.gov/financing for more information. You can also pick up a copy of Ralph Alterowitz and John Zonderman's book, Financing Your New or Growing Business: How to Find and Raise Capital for Your Venture (Entrepreneur Press).
Today, it's important to look beyond the obvious when money-hunting. Have you considered starting with your developing client and customer base? If you land a customer of some magnitude, you can try to get impending invoices financed early on to provide working capital, says Petersen. Another option is the convertible bridge loan, which converts debt into equity in the form of preferred stock as a company grows. "It's very tied-up equity money," says Tom Kinnear, executive director, also of the Samuel Zell and Robert H. Lurie Institute for Entrepreneurial Studies. This loan can give investors incentive to provide you with funding in your company's early years.
- Obtaining the required permits: Instead of spending hours in line, take a shortcut with www.sba.gov/hotlist/license.html, which provides links to the state agencies that handle licenses and permits. You'll get a good overview of what's required in your state.
- Finding a mentor: Get free business counseling with the SCORE program. It's associated with the SBA, which offers its own mentoring programs. Call successful businesspeople, ask who mentored them, then map your strategy. "You can shorten the [start-up] process by a month or more," says Bob Wilson, director of the Center for Entrepreneurial Growth in Oak Ridge, Tennessee.
If you're really stuck, try this creative approach: "Take out a classified ad in the help wanted section saying 'Needed: a mentor for a young entrepreneur,'" Krupp says. "That would catch someone's attention."
- Creating your first board. A great board of directors can lead to funding, so you don't want to take years to find these people. Have a plan. Make a list of people who understand your industry and can open doors to other people. Your board members, in some ways, are also your mentors. Call their people, Wilson says, and ask permission to mail a summary of your idea, the kind of time commitment you would need, why you want this person on your board and what he or she would receive in return. Then follow up and work down your list. Log on to www.mapnp.org/library/boards/boards.htm for more advice on selecting your board faster.
- Securing trademarks and patents: The U.S. Patent and Trademark Office has put all its trademark and patent information online, free for anyone to access. You can search to check if someone else has already trademarked your business name, and you can also research U.S. patents dating back to the 1700s. "It's a tremendous resource," says John P. Blasko, special counsel for Fox Rothschild O'Brien & Frankel LLP in Princeton, New Jersey. "And it can speed up the process." Visit www.uspto.gov/main/trademarks.htm and www.uspto.gov/main/patents.htm for more information. Sites such as LegalZoom.com can offer research help, too.
- Finding your first customers: Besides spinning your card file and networking for customer leads, why not offer a finder's fee to friends who bring in your first customers? And don't be afraid to be a buttinski, either. Krupp landed one of her earliest clients after she eavesdropped on a woman talking about her organization's publicity efforts while riding a stationary bike at her gym. Krupp shared her thoughts with the woman on how she would redo the company's campaign. The next day, the woman called Krupp, and the two started a business relationship that continues to this day. Take a look at www.powerhomebiz.com/vol36/customer.htm for additional advice.
Start-Up: Do It . . .
Do It Cheaper
Who doesn't want to save money when starting a business? While you don't want to scrimp on everything, here are a few areas where you should definitely shop around:
- Insuring your business: You'll have a variety of insurance needs to cover, from insuring your property to liability coverage. Talk to businesses that are similar to yours to see what coverage they carry, says Madelyn Flannagan, vice president of education and research with the Independent Insurance Agents & Brokers of America in Alexandria, Virginia. A big way to save is by asking agents for extras they might throw in your coverage package. Visit Trustedchoice.com for more advice. Or check out Entrepreneur.com's own extensive Insurance Center.
- Finding affordable office space: Look into incubators, temporary or subleased office space. "Sometimes that's cheaper than finding a long-term lease when you don't know where your company's going to be," says Roger Staubach, former Dallas Cowboys quarterback and co-founder, chairman and CEO of The Staubach Company, a real estate firm in Dallas. "Try to get the terms of your lease as short as possible, or at least [include] a buyout [option] so you're not stuck with liability if your business plan doesn't work." Also check with your city government to see if it subsidizes space leased in less developed areas. Visit www.bankrate.com/brm/news/biz/Cashflow_banking/20000818.asp for 12 tips on finding affordable space.
- Equipping your office: It's easy to spend too much. To cut costs, look for office surplus stores and be aware of local business closings. Another tip: Did you know that your state government sells surplus office equipment at bargain prices? You just have to know where to shop. To get started, check out the National Association of State Agencies for Surplus Property (NASASP) online at www.nasasp.org and check out the NASASP roster link for the office in your area. Another place to look is www.liquidation.com, which sells federal government surplus items, including office equipment and supplies.
- Shopping around for phone and ISP rates: Do you want to rely on a cell phone instead of a landline, or use both? When it comes to the Net, there's DSL, cable modems, dial-ups and T1s. Rates vary, so you'll have to shop around with providers' sites, such as Covad.com. The key is not to buy too much, too soon. "Don't sign a three-year contract. Only sign for a year at most," says Tom Heslin, president of Sunsar Communications, a telecommunications agency in Trumbull, Connecticut. Besides cruising the sites of your local Baby Bell and long-distance providers, try sites like GetConnected.com, where you can find links to a bill calculator, a long-distance glossary and tips for setting up a calling plan.
- Advertising: You don't have to spend an arm and a leg to get your name out there. To cut costs, look into co-promotions with local companies that complement your business, adopt guerrilla marketing tactics, and consider co-op advertising . Also, be sure to read www.adage.com and www.adweek.com to keep up with trends in advertising and marketing.
- Outsourcing: You need someone's expertise, but you don't have any employees yet. Looks like you'll have to outsource. How do you hire talent on a budget, and where do you find these people? Thanks to Web sites such as Guru.com and Monster.com, you don't have to shop locally anymore. When negotiating rates with free agents, don't be afraid to offer equity, future bonuses, advisory or board positions and other incentives in lieu of hard cash. Sell them on your vision, that you're in it for the long haul. "Think creatively and lay [your vision] out before you even start communications," Wilson says. And don't forget to check out Freeagent.com for a handy link for employers.
Start-Up: Do It . . .
- Center for Entrepreneurial Growth
(865) 220-2020, www.tech2020.org
- Fox Rothschild O'Brien & Frankel LLP
(215) 299-2000, www.frof.com
- Independent Insurance Agents & Brokers of America
(800) 221-7917, www.independentagent.com
- Krupp Kommunications Inc.
(212) 767-0077, www.kruppkommunications.com
- Midwest Entrepreneur's Forum
(312) 857-0301, www.gss.net/mef
- Morrison & Foerster
(212) 468-8000, www.mofo.com
- Sunsar Communications
(203) 445-1555, www.sunsar.net
- The Staubach Company
(972) 361-5000, www.staubach.com
- Weisberg, Mol?, Krantz & Goldfarb LLP
(516) 933-3800, www.weisbergmole.com