Going it alone

piersk

This is kinda aimed at british entrepeneurs, but I guess I'm looking at advice from anyone.

All the jobs that I've looked at over the past few months haven't been what I want to do when I graduate. So, I figure that the way to get a job doing what I wanna do is to start my own business. I know what I'm gonna be selling (software, before anyone asks or makes rude comments 😉 ) and I know how I'm gonna go about it.

However, it's kinda daunting and I wondered what advice people could give me.

Please note that I'm not talking about freelancing, but actually setting up a company.

Thanks y'all

Elizabeth

Piers, do you have any local small business resources? For instance, here in Cincinnati, we have a group called "the incubator" for people starting their own business - they provide cheap office space, business consulting from retired executives, and networking with other small business owners. I know it's helped numerous small business owners get up and running. You might look into something like that if it's available.

Our business is very small, but we're going into our 10th year. Being your own boss can be great but it can also be a lot of work - you have to be willing to do some menial tasks (such as making your own copies and answering your own phone) and wear many hats. Time management and self-discipline are crucial, especially if you're working at home.

Nothing ventured, nothing gained so they say, so I wish you luck!!

-E

onion2k

This is something I'm also considering doing in the fairly near future. Working for other people who don't have the same vision you do is a major pain in the arse.

weekender

Hi Piers

Go to www.businesslink.gov.uk, they sent me a really helpful book about starting up, different kinds of businesses, etc. They also have a huge publication library.

There's also a load of incubators and free advisory groups, such as www.out-law.com.

I was looking at doing the same thing not long ago; i'm a firm believer in creating your own position. If you want me to chip in in any way, i'd give it some serious thought...

Cheers, adam

vaaaska

Ok...having been involved with 25 or so small, new companies over the years some thoughts for you.

Write a business plan. It seems like a silly thing to do for a one man operation, but it's not. It will help you crystallize your plan and your approach.

[tangent] I wrote a biz plan in early December that appears to have been adopted by two investors. I got word over the holidays that, with a few changes, the project (which I had mentioned here) is going forward with or without me. I felt like I presented a good case for it to exist too. [/tangent]

Write a separate marekting/advertsiting/pr plan. You don't have to believe me about the importance of this, but knowing what and when is critical because you will soon be too busy for it. Having materials ready to go when you need them is also critical. Luncheon's, conventions, ad placement, volunteering and such are all very important and must be done whether you are making the big bucks or not. Write it down and do it. Revise it every three months.

Keep your finances in order.

Do you have a copy of the "Boot Strappers Bible?". It's out there and pretty easy to find but I can get you a cope if need be.

http://www.changethis.com/8.BootstrappersBible

It's pretty generic but I found it a worthy read for a person who is just getting rolling.

Good luck...v

bubblenut

Although I've never done anything like this myself before I would say that an important aspect which hasn't been mentioned yet is market research. You can have the most amazing prouct in the world but if it doesn't fit anyone's needs then it's not going to sell. Identify your target audience and then it's time to dig into some of those quickly forgotten (if you're anything like me that is) requirements analysis skills I'd say.

Roger_Ramjet

Most small businesses/self-employed have one BIG problem: CASH FLOW. Without it you just can't function. Don't expect to make any money for a while so you'll need enough money to carry you through the first year at least.

Which brings one to the second major problem - clients who don't pay. The trouble with software is that it's intangible. If the client does not pay up then taking them to court can be very difficult, and expensive. Proving that your software is worth £X can be almost impossible in a civil court. So a good lawyer who can draw up good contracts is a must. Even then, expect to be robbed by clients on a regular basis.

vaaaska

Originally posted by Roger Ramjet
Most small businesses/self-employed have one BIG problem: CASH FLOW. Without it you just can't function. Don't expect to make any money for a while so you'll need enough money to carry you through the first year at least.

This is not a problem as long as you work with this limitation. Service based business can make money from the very day they have their biz license if they set up operations in a smart way. It's not an obstacle...

That being said, finding 'good' clients in the beginning (unless you don't need to worry about money) is key.

When I began years ago, I had projects lined up and I was still working a day job. Before I officially started working for myself I was already moving forward.

Roger_Ramjet

Yep. Working as a one man band and charging by the day is no problem and can be very lucrative. Problem arises as soon as you want to take on a larger project, or employ more people. Then cash flow will become the focus of your waking hours.

vaaaska

Originally posted by Roger Ramjet
Yep. Working as a one man band and charging by the day is no problem and can be very lucrative. Problem arises as soon as you want to take on a larger project, or employ more people. Then cash flow will become the focus of your waking hours.

I think you mean LARGE. What I have done in the past was simply let my client know that I'm not huge (but one man op it's also part of the reason why they are working with you). Certainly, ask for a good retainer and then bill at least every two weeks. This keeps you constantly in the green plus it's really good project management at the financial side of things. If a client can't meet these requirements then they need to work with a shop that could possibly cost a heck of alot more.

But worrying about growth in that sense before you even get started...getting clients is a much bigger issue...

AstroTeg

Piersk, if you're still in school and you're really serious about starting your own company, find out if your school offers an entrepreneurship class. Its probably not a degree requirement, but the cost of the class might just be worth it.

I took an entrepreneurship class and discovered a ton of things about starting up a company (and it was worth the money and 15 weeks of class to learn things which took some companies many years to learn).

Instead of a business plan, check out what is involved in doing a feasability report. The feasability report is a subset of the business plan. If you do your feasability report right, you'll learn who your competitors are, how you'll beat them at their game, and how you'll make a buck. A business plan does the same, but in much greater detail.

In some cases, skip the business plan and feasability report! (Although I recommend doing some research or take a class before making this decision.)

The nice part about taking a class is you have an instructor you can talk to about ideas. Plus the class might have a research project. Also handy is your instructor might have contacts to venture capitalists and other important contacts.

Before investing too much energy into your idea(s), check out who your competitors are. Who would be your customers? Have you talked to your customers? Do they have a need/want for your product/software? Figure out how much they are willing to pay for it (this may require researching your competition and what they're charging).

Is this something you can do part time on the side? If so, you might wish to start now.

Good luck and have fun!

Doug_G

I think most important is to have a clear idea of what you expect out of your own business.

If you want the big bucks you need to focus on a business with the potential to go public in the near future.

If you want a high income you should focus on a private corporation that has good revenues and profits.

If you want independence, you might want to be a sole proprietor.

I jumped from a job to a small corporation startup some years ago. I worked hard, had equity, but it ended up worthless when the company folded a few years later.

I then jumped into a non-technical retail business I ran myself, didn't have enough profit, got well into the hole but luckily had a great customer base and after 4 years sold my operation to a fortune 500 company for enough cash to get back out of the hole. And they hired me and I worked for them for a couple years.

Quit to get into another small corporation startup, but had a falling out with my co-founder, quit, and got screwed out of my equity.

Enough I said, and now I sell service only to a small group of loyal clients, some I've had for over 20 years no. I make enought to cover expenses, no employees, no boss, I can work from anywhere, life is good!

If you go out on your own one prediction I'll make is you'll be willing to eat beans and live in a tent rather than go back to a corporate environment. 🙂

Roger_Ramjet

Just bear in mind that the skills you ned to be a good programmer have NOTHING to do with the skills you need to build and run a business. Those are totally different.

TheDefender

This will be a bit long-winded, but when have I ever not been so? Let me first preface this with this: I am no expert by any means, but I am a one man shop selling database and backend design to web designers working with drug companies to develop online clinical research trial databases. (My wife is my secretary). I just filed my FY04 taxes, and had a gross income of $125,000 my first fiscal year (actually 2 quarters), and am primed for a 165% growth next year. I don't plan on ever going public, because frankly, I don't want other people dictating my business strategy to me. Oh, and I started it all on less than $300.00.

BUSINESS PLAN, BUSINESS PLAN, BUSINESS PLAN

Astroteg, although the feasibility report is a VERY important subset of the business plan, as a whole it won't/can't accomplish what a business plan will.

The biggest aspect of the business plan, in it's entirety, is the strength you bring to the table when approaching venture capitalist groups for startup or rolling capital. Also (not sure about how it works in the UK), but in the US, you have to file a business plan if you ever incorporate (in most states).

bubblenut, a good business plan will incorporate a strong marketing plan into it.

Another thing to consider is incorporation. Although most small time companies can get away with sole-proprietorships or partnerships, you should also look into s-type or c-type corporate status such as an LLC. The long term implications are good (if you plan to someday scale up to some mongolithic sized software company.) If you plan to incorporate in the US, then look into Delaware. You don't have to have residence there and they are very favorable to small businesses (in every aspect from incorporating to taxes).

Don't turn away from any opportunity you may have to apply for grants. They are everywhere (here in the US) A little hint here... women/minorities in leaderhsip roles can give you a huge advantage over caucasian males, so find a woman you trust (a mom, wife, aunt, etc.) and see if she'd be willing to take on that type of role.

If you bring on partners, look into non-disclosure agreements and non-compete clauses. They can ward off some people, but if that person wasn't willing to sign them, then how much loyalty would they have had with you to begin with, right?

Lastly, make sure your ducts are all in a row. You can file all of the necessary paperwork without the assistance of a lawyer (but caution, do GOOD research). You will always be better off with a lawyer, but it isn't required right away.

Elizabeth

Originally posted by Doug G
If you go out on your own one prediction I'll make is you'll be willing to eat beans and live in a tent rather than go back to a corporate environment. 🙂 [/B]

I say amen to that, brother! I haven't had a raise in 4 or 5 years, and I make crappy money, but the intangibles more than make up for it. Autonomy, flexibility, freedom of creativity, family-like atmosphere... wouldn't trade it for the world.

vaaaska

I used to have a boss who paid himself $250k+ per year, but the funny thing was that he would always comment that he didn't know where his money went. It was all in the company actually...one of the pitfalls of owning your own business (unless you truly incorporate or whatnot but that can be a little advanced for beginners).

Plus, he was always asking all of us for pocket cash during the day! It was quite funny...

AstroTeg

Originally posted by TheDefender

BUSINESS PLAN, BUSINESS PLAN, BUSINESS PLAN

Astroteg, although the feasibility report is a VERY important subset of the business plan, as a whole it won't/can't accomplish what a business plan will.

The biggest aspect of the business plan, in it's entirety, is the strength you bring to the table when approaching venture capitalist groups for startup or rolling capital. Also (not sure about how it works in the UK), but in the US, you have to file a business plan if you ever incorporate (in most states).

Sounds like you're doing great. Congrats!

Although I want to revisit the business plan aspect and incorporating.

Yes, in most cases of incorporting, you'll need a business plan.

BUT, for a properly done and very complete business plan, it can take one person working 40 hours a week on average of 3 months to assemble the plan. If you have more people and more connections to do research, then maybe this can be faster. But word is 3 months to a year or two to complete.

This is a monster huge time investment. Its absolutely necessary for banks and investmentors. And it may be necessary for people who are unsure if their business idea will work. Or for people who like to plan things out or need to get organized.

But if the business idea has been done before and is pretty simple, I don't think the time and effort to pump out a business plan is going to be worth the effort. Especially if its something like web development where everyone is doing it and its pretty easy to get into.

I'm not saying a business plan is not helpful. All I wish to point out is it may not be for everyone and every company situation. And for web development, it really may not be needed if you're just a one man show. Now if you've got some money to play with and plan to have some employees doing web dev right away, then I'd definitely do a business plan. Because now you have to ensure money is coming in to cover the employees.

But a business plan is not required for LLC status (the company I'm with is an LLC and we didn't need one - in one paragraph we summed up what line of work we'd be doing and that's all that was needed). And LLC status, although somewhat new, has the legal advantages as a corporation, and the tax advantages (including less documentation and paperwork) of a partnership/sole proprietor. At least this is the case in Ohio. You're mileage may vary in other states and countries.

Also, at least in Ohio, you have a super huge legal risk if you're are incorporated AND doing business out of your home. If someone sues you, they can argue you company status. And if you haven't been playing like a corporation by filing meeting minutes and all the wonderful tax paperwork, the court will see you as a sole proprietor leaving you and your possessions unprotected. An LLC will protect your possessions.

An LLC is a lot cheaper to start up. The state fees will be cheaper for an LLC than for a corporation (we established our LLC for about $650 which was a little high - $500-$600 is typical in Ohio - if I remember correctly, in Ohio its about $2500+ easily to establish a corporation).

And yes, an LLC can actually grow and switch status to any flavor of corporate. But if you're already corporate, you can't go back to an LLC (at least, not easily). Again, this is the case in Ohio, not always in all states.

An LLC will also allow for multiple partners to share in the ownership of the entity (very similar to how an LLP works). And the tax filing is still pretty easy.

I would say, if LLC in your state offers you pretty good protection, go for it. Unless of course it doesn't fit and you need the advantages of a corporation (have investors outside of the US? need to sell shares of stock? plan to have a board of directors? etc) For getting started, an LLC may be a smart and cheaper move, but only if it offers you protection in your state.

But I think the BEST thing anyone can do is sit down with a lawyer and explain your ideas and they'll be able to help you determine which entity is right for you. Plus, you'll probably want a lawyer to prepare the filings with the state.

AstroTeg

Originally posted by vaaaska
I used to have a boss who paid himself $250k+ per year, but the funny thing was that he would always comment that he didn't know where his money went.

I think its tough for entrepreneurs to keep track of the money flow. There comes a time when its a smart move to get an accountant involved. From what I've learned, a good entrepreneur knows the areas their good at and hires others to cover the areas they are not.

Elizabeth

Keeping track of your finances is a huge job but very important - we have a full time person who does all the billing & accounts receivable, insurance, taxes, payroll and employee stuff like workman's comp. We'd be lost without her.