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.
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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 start-up 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 start-up, 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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