Ok, so I was talking business last night with a close friend and he asked me to post an article talking about the top 10 things not to do as a business owner / start-up company. So here is what I put together after looking back over the last ten years going through the school of hard knocks.
- Don't start a company from the bottom up, start it from the top down. To understand this better you might like to read the E Myth by Michael Gerber. The short version is, think like an Entrepreneur not a Technician. Most people start their company because they are good at some trade - for me it was graphic design. I was a great designer so why not open my own shop. This is how it usually goes. This is bottom up thinking. Top down thinking, is developing a business that does not need you in it to run successfully. You basically build the business model and hire people to do the work and managers to manage the workers. All the while you focus on growing the company and business strategy and development.
- In conjunction with number 1 - Do not start without a business plan. There are plenty of ways to do quick business plans and maybe these are a good place to start, but keep in mind a business plan is needed to run your company for every day use and management. It is also important for getting funding. But in my eyes a business plan is more important to have in order to manage, run and grow your company. A business plan is a living document and will be changing all the time as your company changes, grows or finds new opportunities.
- Do not start without a clear defined Vision Statement. You've probably heard the saying "If you don't know where your going, any road will get you there". This is the case with a vision statement. A good example of a vision statement is JFK's "We will have a man on the moon in 10 years". This is powerful, inspiring and exciting. People need to know what the main goal is and be empowered to do whatever it takes to reach the vision. The best leaders have a strong vision the whole team can get behind.
- Don't fly by the seat of your pants with money. Before you start your company figure out your financial situation. I recommend figuring out what your expenses are going to be per month to stay open and then add 15 to 20% to that number to be safe. Now make sure you have 6 months saved before you go out on your own. This will give you a buffer until you learn how to fully get up and running. Cash is the lifeblood of any company. Make sure you have enough to stay afloat. Statistically 90% of all businesses fail in the first 5 years so following these tips will help keep you in the 10% that succeed. Persistence through tough times is a key as well. In order to stick with it through tough times, you will need to be passionate about your business. Don't pick something you can't stick with.
- Speaking of money, don't try to run your company on credit cards. Many companies do this, and early on so have we, but this is not the best method of running a company. Work with a budget and spend wisely. Hire a CFO or part-time financial consultant if needed, but mange your money wisely. Credit card interest will eat you alive if you don't keep after things. Compound interest only works when it's working in your investments, not on your credit cards. We've played with this can of worms and now are a cash only business. Being cash only isn't for everyone, but having very little debt will help create value in your company and make you more enticing to buyers.
Since this article is getting pretty long I have decided to break it into 2 articles. Check back tomorrow for part 2 of this article.