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Easy Steps to Startup

Everything has its place, especially when launching a biz. But what comes first? Here's what the experts say.

The year 2000 was a good year for Joshua Feinberg, an IT consultant in West Palm Beach, Florida. A flurry of Y2K projects and other work led to "a tremendous year," he says.

But there was a problem: Feinberg had established his business two years earlier without the help of an accountant, and money matters were suddenly an issue. Once he finally did meet with an accountant that December, he had to spend his New Year's Eve running around to mail an application for a new tax plan that would save him several thousand dollars. Everything worked out, but he could have saved time and money by getting it right the first time. "It would have been less of a panic," says Feinberg, 30. "It was kind of a last-minute stretch."

Taking care of the basics out of order can wreak havoc on your business before it gets off the ground, or at the very least cost you in money, time and frustration after it's already up and running. Donna Holmes, director of the Small Business Development Center at Penn State University in University Park, Pennsylvania, has seen entrepreneurs make many of these mistakes, such as running up thousands of dollars in personal credit card debt assuming a business loan will come through, only to be denied. "You have to make sure things are done in an order that's not going to hurt you in the end," Holmes says.

But what should you do first, and what should be last on the list? How do you find order in all the chaos of starting a company and avoid backtracking and wasting time? Here's some advice from the experts, as well as entrepreneurs in different industries who have been there, done that.

Business Order 101

Like parenting, what to do-and when to do it-is a learned skill in starting a company. "Once you've done it three, four or five times, everything's just automatic," says Bruce J. Lynskey, a professor at the Owen Graduate School of Management at Vanderbilt University in Nashville, Tennessee, as well as an entrepreneur who has started six technology companies. Today, he's the CEO of Nashville software startup Visual Risk Technologies. "You just do it instinctively."

The first time around, however, is anything but instinctual. Lynskey has watched beginning technology entrepreneurs backtrack to take care of patenting and trademarks or create agreements to protect their companies from liability if bugs in their software ruin clients' computer systems. "Somehow, the company got up and running, and they're going backward now to do these formation things that should have already been done. At that point, it can become a little messy," Lynskey says. "It could be the end of the business."

Spending money on a knowledgeable intellectual property attorney was Eric Sieczka's first step as soon as he had an idea and a business plan for his second technology startup, Pixel Velocity Inc. A bootstrapped digital imaging hardware and software company in Ann Arbor, Michigan, that's developing Department of Defense products for commercial use, Pixel Velocity needed help patenting the company's main idea, registering a trademark and incorporating in July 2001. "It's a prudent step, because otherwise you could invest a lot of time and energy in something that ends up not being yours or puts you in a position where you have to defend it in court, which can kill a small company," says Sieczka, 32, Pixel Velocity's co-founder, president and CEO. "Spending money on good legal advice early is a smart use of money."

The company secured a Web domain, and a few months after getting legal advice, Sieczka hired a CPA to help Pixel Velocity set up its books for tax purposes. Then the company kept a low profile, building its product slowly and deliberately behind the scenes with very little capital. The company's six employees worked part time and for equity. Hiring full-time sales and marketing people and buying risk management insurance wasn't a priority until the company launched products late last year.

"We didn't want to create a lot of visibility until we had something to show," he says. "The timing is really important, to make sure you're not putting yourself out there before you're ready." Think about what naturally makes sense at what time, he suggests, and don't rack up debt that requires you to create early cash flow before you're ready.

"To me, it's logical. You can't sell something until you have it, and you don't have it until you know that what you're going to create, you own," Sieczka says. "You have to take the steps to make sure you're not wasting time, energy and money in the wrong places."

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Chris Penttila is a Washington, DC-based freelance journalist who covers workplace issues on her blog, Workplacediva.blogspot.com.

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