DISQUS

Jeff Hunsaker · 2 years ago

I remember reading this when Dane first published the list. I went home and told my wife (who started a fitness and personal training business last year), "hey, I read this list and you're doing great!"

She's just now, after 24 months, incorporating (LLC), acquiring an attorney/accountant, getting a web site, business insurance, and a separate bank account for the business. I think she was very smart and frugal about starting smart with the least risk possible.

In contrast, my mom purchased a recruiting franchise a few years back that went bust in about 24 months. The franchise required a substantial (upper 5-figures) loan for the fee as well as infrastructure. She (sorry mom) made the mistake of submitting to the "requirements" of the franchise and leased office space, bought new computers, a PBX, and everything one needs in an office (desks, filing cabinets, etc.) We all cringed at the expense but wished her well and tried to provide support whenever possible.

I suppose hindsight is 20/20 but she should have passed on the franchise, purchased a professional Monster.com (or other(s)) subscription, and gotten on the phone calling folks. There was nothing she gained from the franchise she couldn't have read in a book/blog and nothing she gained from the office superior to her kitchen table, a Vonage account, and her old computer.

My advice from witnessing these experiences: bootstrap for as long as possible. My wife was a sole proprietorship for 24 months before she even considered an LLC, business insurance, etc.

However, at this point, she's beginning to take on contractors, the taxes got too complicated for me to field, and we wanted to insulate the family finances from any suits against the business. It's time.

Ben Yoskovitz · 2 years ago

Jeff - I'm a huge supporter of bootstrapping, and I've lived through a few great bootstrapping experiences. I've also lived through the unpleasant experience of being under-capitalized.

Congratulations to your wife - looks like she did things smartly and strategically.

Tariq Khan · 2 years ago

Ben,

Jeff's wife Diane did well, and I am glad she did. However, I agree more with the suggestion in your post regarding incorporation.

I am an attorney and consultant to entrepreneurs. I help people get started. I agree that cost savings at the beginning are very important, and leases and expensive office furniture are easily avoided.

The risk associated with not incorporating can be very high, and the risk is directly linked to personal finances. Spending a few hundred dollars to incorporate to protect those finances seems to me like a wise investment.

If nothing bad happens -- as in Diane's case -- then the entrepreneur already has a corporate structure to work with. If something bad does happen, then all liability is personal.

Jeff Hunsaker · 2 years ago

@Tariq - Just to clarify, she had/has a $2MM personal liability policy and the family has a $1MM umbrella policy. I've urged her to incorporate for some time but I think she wanted to make sure she would/could "make it" prior to incurring a lot of expense.

Ted Demopoulos · 2 years ago

One thing you don't need is a perfect anything. if you wait for the "perfect" time, "perfect" idea, "perfect" blah blah blah you'll never start!

Just do it, or "Just Don't Say No, Not Yet" forever.

Professional procrastinator Ted

Naked Jonny · 2 years ago

Totally agree ted. Noones saying go into things gunho but also if your afraid to risk and your waiting for the perfect moment, it wont come. Worse case scenario, if you have minimised the risk initially is that you fail. Fine, learn from the mistake and move on.

Ben - I would say the best possible startup team is 5. Same priniciple for sides but it also allows you to cover maximum bases without being oversized. With three i think you are still limited. My personal opinion anyway, of course differnt things work for differnt people.

Stuart Baker · 2 years ago

Ben, for the most part I think you are right on with these points. Having had one long-term small business and now easing into another, one comment I could make is that taking several of the steps, such as setting up a bank account, incorporating, consulting an attorney, coming up with a name...taking these steps is, to me, practical, and it makes the whole thing more real, more official and more substantial. I believed myself more, which customers know.


To me, differentiating the business and establishing it legally is simply sound professionalism. I think some of the advice you counter in this post is penny wise and pound foolish.

Thanks for an interesting post.

Stuart Baker
www.consciouscooperation.com

Ben Yoskovitz · 2 years ago

Naked Jonny - You don't think 5 people is too many? Too many conflicting issues? Too many chiefs?

Stuart - I like your thoughts on the practicality of doing some of these setup things, as well as the fact that it makes things feel more substantial. That was very much part of my point when it comes to corporate vs. personal branding and identifying a company name and logo. So thank you for expounding on that further.

Miriam · 2 years ago

I think that Dane is wrong on a few points.

Business name and logo: When I started my business, it was home-based, but my vision was to grow and eventually have employees and an office. In order to grow, I felt that I had to look "big" right from the beginning. That's where branding comes in - I picked a name, designed a logo, and built a website and had biz cards printed with my colors and logo. There is no question that this helped with my growth.

Business phone number: In the beginning (sounds biblical :) ) I did not have a business line. Clients would call, and sometimes my kids would answer. My kids are wonderful, but not really prepared to talk to clients. So finally I got a separate line, and made it very clear to everyone that if it rings, they should NEVER answer! That worked.

Accountant: I don't know how taxes work outside of Israel, but here the country LOVES to tax. And the smaller your business is, the more you are at their mercy. Hiring an accountant is vital so that when you get the letter from the National Insurance Institute stating that you owe them 5000 NIS (about $1200 US), instead of
tearing your hair out and waiting for them to destroy your life, you calmly hand the letter over to your accountant for their care. If tax authorities in other countries behave the same way, it is absolutely worth it to get an accountant. I have worked out an arrangement with my accountant that costs less whereby I track all income and expenses and pay all taxes, and they take care of the income tax return, my employees' salary slips, miscellaneous tax issues and scary letters like the one mentioned above.

Al · 2 years ago

Good points. I think it boils down to "just do it" and don't get caught up on all the small stuff. I agree with this. Over time, IF it is working, you will come back around to things like bank accounts, tax structure, etc... Good list. Thanks.

Carleen, from Ars Logo Design · 7 months ago

I think that these recommendations can work in particular cases, but are dangerous for the average entrepreneur. If you invented an original concept that creates a new market that is in need of your product, it's highly possible that you don't lose any customer just because they have no other choice. But in the long run, there will always be somebody else who does things better and will gain your customers preference. If you own the only oasis in the middle of the desert, everybody will be willing to accept your conditions: If you're a mall store, you'll have to comply with all those subjects....

Mary Ann · 7 months ago

Starting a business, large or small, online or offline is a risky venture. You need to ensure that your business plan is bullet proof and will make money no matter what. After all, most likely you've invested more than just time and effort on your business. Most likely you've also invested a lot of money.