Starting out the Right Way Leads to Business Success
This is Part 1 of a multipart series for entrepreneurs and small business owners. Whether you are just starting or have been in business for a few years, these insights and personal lessons might save you a load of money and regret.
I call it Blood and Guts because that’s what it takes to be a business owner. You deserve a medal. What most people think is liberation from a 40-hour workweek often becomes an 80-hour or more workweek, and the reward is not always financial.
Having started multiple small businesses of my own and marketed/consulted with many others over the past 40-plus years, I have seen or personally experienced a lifetime of good and bad decisions. I hope these insights will be valuable to anyone who chooses to take the risk.
Hire a very good CPA at the very beginning.
When I say the beginning, I mean at the very point that you have tested the idea and feel it has a chance to work. There are so many laws that work in your favor and laws that don’t, and it is comforting to know someone has your back.
When I started my first business, I used a friend who prepared taxes to help me with the formalities of setting up. I was good at what I did but not familiar with the laws of the state.
I assumed (and you know what that means) that he had set up my company properly with the state. I made payments to Georgia as required by law, but I found out after a year that he never registered my company. Even though I had paid religiously, I was fined for not registering properly. That was a hard blow to a struggling young company.
Hire a CPA and a lawyer and find a great banker. These are the three anchors who will help steady the new business.
Join a peer group.
Very few new ideas happen in a vacuum. The good news is there are groups for everything.
I am not just talking about a civic group or a weekly roundtable. Find a national group that specializes in what you do and get involved. Chances are a member or two has faced every trial you will come up against at least once.
I was fortunate enough to join a small national group of marketers around my second year in business. The advice I received doubled my profit margin in less than six months. Some years later I was able to give back to new companies who joined.
In addition to great advice, there can be perks including national insurance rates, discounts for supplies and even group rates from suppliers. If there is a trade show, go. Even if you are small, the cost of the airfare and hotel will be repaid with one great connection.
Don’t advance cash or loan money to anyone!
When you own a business, friends, family, employees, you name it, will hit you up for cash. After all, they say, you can “write it off.”
Wrong! It is such a fallacy that business owners are making all the bucks and can write off personal costs. I made the mistake once. It was an employee who was going through … well, you know the story. Despite the paper I had him sign, I never saw the money again. That was 20 years ago.
The next time it was a relative. I had decided I would never lend or advance money again, but this was too close to home. So, I gave him the money. It wasn’t a loan, and I never expected to be paid back. You must say out loud to the relative, “I want to give you this money. I never want to be paid back, so don’t offer.” Accept their gratitude and feel good about your decision.
Bottom line — if you can’t give them the money, say no.
Be careful with partnering.
If you are even thinking about partnering, refer to point No. 1 and speak with your CPA and attorney first. But I can tell you the decision goes beyond the financial and legal aspects.
There’s always a way to do it from those perspectives, but it boils down to whether you want to be “married” to this person. If it’s true that half of all marriages in the United States fail, it is equally true that half or more of all business partnerships hit the ropes, too.
When it goes wrong, it will drag you through personal hell. I learned that lesson when I partnered with a guy on an allied business. My details would be like many others, so the whole story is not worth rehashing, but the bottom line is it cost me many sleepless nights and a lot of money to get out of that deal.
I let the lure of high expectation smother my reliable gut feeling. My blood pressure still goes up when I think about it.
When I became more successful there were multiple offers to partner, but, having learned that hard lesson once, I never accepted any offers again. If it is a friend who is making the offer, consider how valuable that friendship is and whether you are willing to give it up for a few dollars. Good friends need to stay good friends. Do not make them partners.
Got any good stories yourself? Shoot me an e-mail at firstname.lastname@example.org.