What to Know Before You Go

10 Things You Should Never Do Before Starting

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Whatever you do,

  1. Don’t write a business plan – this comes later
  2. Don’t try to get a loan – you won’t qualify anyway
  3. Don’t start building immediately – get feedback first
  4. Don’t rent an office – work from home
  5. Don’t advertise – what would you advertise, anyway?
  6. Don’t buy fancy equipment – rent or borrow, save your cash
  7. Don’t quit your job – there’s a lot of setup you can do first
  8. Don’t incorporate – worry about this distraction later
  9. Don’t look for a partner – explore the idea first
  10. Don’t hire for employees – start building it yourself

These are fatal mistakes that can doom your startup from the beginning.  They are either major distractions that pull your focus away from what matters, or they’re a waste of your precious startup capital.  Put first things first, and avoid these ten temptations.

Congratulations, It’s a Boy!

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Founding a company is like having a baby. It takes just as much time, energy, and attention. Like raising a child, your startup is a direct reflection of you, and it’s up to you to make sure that it has the right values and mission. You have to protect it when it’s young, and help it grow up to be strong and independent. You pour your heart and soul into it, and will do anything to make it succeed. It sucks your bank accounts dry and you gladly pay.

If you have a business partner, it’s like having a spouse. In fact, in the early years you will likely spend more waking hours with your partner than your spouse.

Like parenthood, owning a business is also one of the most rewarding things you can do.  To watch your business grow into a powerhouse is amazing and inspiring.  To see that you created something where before there was nothing, to know that you made your own little dent in the universe, creates an unparalleled feeling of pride and satisfaction.

Before you get started, recognize that starting a company is a serious commitment.  If you are going to succeed, it will take the same dedication and lifestyle rearrangement as parenthood.  Are you sure you’re ready to bring a baby into this world?

A Family Affair

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You already know that starting a business is an all-consuming pursuit.  What you may not realize is that it will consume your family as well.  Starting a business is truly a family affair. To one degree or another, everyone will have to step up and make sacrifices.  Your income will decrease significantly for the foreseeable future, which means you won’t be able to afford many luxuries.  Instead of leisure time, your family will probably end up putting in time on your business. You will be working for most of your kids’ childhoods.

Startups have broken up many happy homes, so set expectations from the beginning. Make sure your significant other is 100% on board, and ready to make the necessary sacrifices.  Starting a business usually does one of two things: it brings you closer together or drives you apart. Make sure your relationship can withstand the stresses of a startup.  Address any hesitation or trepidation up front, with an open and honest discussion. Your family’s unwavering support will be critical to overcome the challenges you’ll inevitably.

Welcome to the NFL

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This isn’t your neighborhood little league.  You’re competing against the best, and you have to be the best if you hope to win in the marketplace.  Capitalism is ruthless, so don’t expect any mercy.  Customers are flippant.  One day you’re flying high, the next you’re bottoming out.  Entrepreneurship is as competitive and cut-throat as the NFL.  You’re going to have to pour it on and give it everything you’ve got.  Just when you think you nailed it, the market will shift, a new competitor will enter, or something will go wrong.  Right when you reach the top, you’ll get knocked off.  To win, you’ll have to excel at the fundamentals, stay eternally vigilant of encroachers, and always search for new opportunities.  Then, the moment you start to get traction you can expect company.  Current competitors or other aspiring entrepreneurs will take notice of your success and copy your model.  Start your business with your eyes wide open, know what you’re getting into, and understand how truly difficult the startup path is.  If it was easy, everyone would do it.

Unadulterated BS

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People like to think that there’s a typical entrepreneur personality. Yes, entrepreneurs are all passionate, good at selling, and diligent about follow-through.  Beyond this, there’s no such thing as a “typical” entrepreneur.  Entrepreneurs come in all shapes and sizes. Every now and then you’ll see a personality profile quiz that purports to help you understand whether you’ve got what it takes to become an entrepreneur.  These profiles are pure, unadulterated BS.  The personalities of successful entrepreneurs are all over the map, from neurotic and obsessive compulsive, to kind and easy-going. Your personality does not determine whether you should start a business.  However, it does play a role in what kind of business you should start, and what kind of culture you will create.  Don’t let a personality profile tell you that you don’t have what it takes.  As long as you have the prerequisites of passion, salesmanship, and follow-through, then you have what it takes to build a business. There’s a place for everyone, so find your niche and pursue your dreams with everything you’ve got.

Plan B: Get Franchised

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If you’re dying to start a business, but don’t have much experience, a franchise might be the way to go. Franchises are great because they are turnkey.  They teach you everything you need to know to run the business, and help with everything from choosing a location to figuring out the right marketing mix.  The franchisor has already figured out a winning formula that works, and you get the benefit of this knowledge when you sign on.  Since you don’t have to reinvent the wheel, you will have fewer startup headaches, and can save a lot of time and capital.  On top of all this, the franchise headquarters wants nothing more than to see you succeed. They make money when you make money.  Plus, they have to show successes and failures to future franchisees, so their success rate is important.  Instead of being on your own, you have a highly experienced team that you can call on for help or advice.

Franchises aren’t for everyone.  Everything is already scripted, and you have to follow the franchisor’s directions down to a tee.  If you march to the beat of your own drummer, then a franchise probably isn’t for you.  But if you’re not sure where to start, or want guidance, a franchise could be a great option.

How to Know When “It’s Time”

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Aspiring entrepreneurs often ask how they can tell when it’s time to make the leap, quit their jobs, and really go for it.  There are two indicators you can look for to know that “it’s time.”  First, it’s time to get serious when you’re emotionally ready to make the leap.  In a way, the emotional aspect is kind of like being in love.  You know that you’ve struck upon the right idea…when you know.  When this happens, you’ll have a gut feeling that this is “the one” and there’s no choice but to move forward.

Second, it’s time to go for it when you’re financially prepared.  Starting a company takes time and capital, so you must have cash in the bank before you leave your job and eliminate your income.  The general rule of thumb is that you should have at least 12 months of expenses in the bank (this includes both personal and business expenses).  If you have a spouse and kids to support, your expenses will obviously be higher.  Many bright entrepreneurs with promising ideas have failed unnecessarily because they didn’t have enough money to get the company off of the ground.

The Part-Time Entrepreneur

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It’s always debatable whether you should start out as a full-time or part-time entrepreneur. Starting a company in your spare time significantly reduces your risk and opportunity cost. But it also reduces your chances for success.  If the deck wasn’t already stacked against you, succeeding on a part-time basis is a lot more difficult than doing so full-time. When it’s a part-time project, your business will be hard to prioritize consistently, your competition will run circles around you, you’ll miss opportunities, and – most importantly – your back won’t be against the wall. If you have the stability of a full-time job, it’s much harder to get out of your comfort zone and do what it takes to get the job done.

It only makes sense to work on an idea part-time when you want to study its feasibility.  When it becomes apparent that you have a winner on your hands, your best bet is to dive in head first.  There’s just no way around it – you will have to dedicate everything you’ve got to your startup.  This is especially true for investors.  If you want to be taken seriously, you have to be serious about your business.  And that means quitting your job and building this business full-time.

Dangers in the Moonlight

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A common way to get your startup going is to keep your full-time job, and be an entrepreneur on the side. This can be smart, or it can be incredibly stupid, depending on your current employer.  When you first start a job, you sign a lot of contracts.  If you read the fine print, you’ll see that the employer almost always retains intellectual property rights.  This means that your employer might have rights to your ideas – even those you think up in your spare time.  In a moonlighting entrepreneur’s worst nightmare, it’s not inconceivable for your previous employer to sue you, claiming that it owns the rights to your invention or company.  Annoyingly, they’ll usually come after you only after you’re successful and fought through the risk.  Obviously, this is a situation that you want to avoid.  Before you moonlight, ask a lawyer to read through your employment agreements.  Make sure that you will own your company free and clear when you decide to take the leap.  Even then, don’t use your employer’s resources to build your company.  It can come back to bite you.