OT - MGoAdvice - Starting own business

Submitted by Dennis on February 19th, 2018 at 3:13 PM
Hey guys, Been putting together plans to start my own business for about a year now. I've made the decision that I'm going to quit my job and kick it off within the next year (It's design and brand consulting if you care to know). The news about my uncle and his terminal cancer kind of shifted my perspective a little. He was a business owner and made the plunge earlier in his career than I, so I've made the determination that I shouldn't waste any more time. You might fail at what you don't love so might as well jump in now. You guys are Michigan fans, and pretty intelligent folks. Any advice you might give to an aspiring entrepreneur? EDIT: you guys are awesome, thanks for advice and kind words.

Comments

othernel

February 19th, 2018 at 3:22 PM ^

I'm in the same boat and starting my own gig. 

My first tip, learn how to use reddit and subscribe and engage with their entrepreneur group. Have learned so much from the people in that group. It's probably about 20% people who have done what you're trying to do, and 80% who want to learn. Really great exchanges of info. 

https://www.reddit.com/r/Entrepreneur/

Goggles Paisano

February 19th, 2018 at 4:47 PM ^

I don't know man - it depends on the nature of the business and any current clientele that may be coming with you.  I went off on my own 3 1/2 years ago and made more money in year 1 working 2/3 less.  

If you are just going off on your own to start-up from scratch with no clients, then yes, you may be light on funds for a while.  

My advice if you need to build a client base is just get out and network.  Relationships are the key to getting referrals.  If they like, know and trust you, they will refer work to you.  It takes time and consistent effort to foster and maintain those relationships.  

yvgeni

February 19th, 2018 at 3:24 PM ^

Yes. It’s going to suck but just keep showing up and you’ll be successful. Consulting is a numbers game. 9 touches per customer before you can get them to even think of paying. Hundreds of potentials for every client. Go to every networking and conference you can. Learn how to sell yourself is the most useful skill any business person can learn.

Did I mention it will suck? You’ll want to give up often. Maybe every morning. Just keep showing up

yvgeni

February 19th, 2018 at 3:27 PM ^

Also create variable business models. It’s never one size fits all for customers. Segment your potential customers out and figure out what their value points are and modify your business model for each differently. Learning each customer groups’ WTP (willingness to pay) is the most valuable thing you can figure out.

Mmmm Hmmm

February 19th, 2018 at 4:16 PM ^

Agree strongly. Also, to the extent you are trying to attract customers at your new firm that you service at your current firm, there may be legal barriers to bringing them on and even if not—no matter what somebody says in advance—they are not a client until they sign on the dotted line. Hope for the best but plan conservatively.

MgoHillbilly

February 19th, 2018 at 3:33 PM ^

Register as an llc, s-corp for taxes. Find a shady accountant and claim everything through the business.

As far as pros and cons go, it's great to have flexibility in my hours and to be my own boss. The management side of work sucks. Income, at least for me, can vary wildly from month to month too.

gkat90

February 19th, 2018 at 3:29 PM ^

You will need to focus on getting referrals.  Weekly networking through a chapter like BNI can help you get 15-20 other business owners looking for opportunities to refer business to you.  Find a local BNI chapter in your neighborhood.

UMProud

February 19th, 2018 at 3:31 PM ^

Be able to live without a paycheck for 6 to 12 months

Don't go into debt

Squeeze every Penney

Have 6 months business expenses in the bank

Don't sign any long term leases

Do everything on a shoe string

Put all your first year earnings back into the business

If you aren't profitable in 9 to 12 months something is wrong

k.o.k.Law

February 19th, 2018 at 5:35 PM ^

and my standard advice is:

have enough in the bank to pay all your expenses for the first year, if you have no receipts

 

also, have enough to pay all living expenses for 12 months

 

After a year, see where you stand.  Per advice below, do not throw good money after bad.

Business owners are optimistic, or they would not have started, and tend to see things through rose colored glasses.

Believe the books.  Some people will not pay you, but you will have to pay all your expenses.

I left the one law firm i worked for, questionable bosses.

Thinking I would then be my own boss.

Wrong.

Every client is your boss.

Good luck!

mGrowOld

February 19th, 2018 at 3:32 PM ^

And all four either went public, sold to a strategic partner in the same space or sold to a private equity firm.  I've been beyond fortunate and now I'm working three days a week (semi-retired I guess) just to keep my hand in the current company to protect my personal nvestment here. 

FWIW my advice is similar to Robbie's:

1. Be prepared to make no money for a while.  Start-ups take time to become cash flow positive and if you're doing this on your own I'm guessing you won't have any outside funding to support you during the lean times.

2. ANYTHING you can do, do.  Many start-ups create cash flow problems by outsourcing work they really could do themselves.  You might only do B work but B work at no cost is probably far superior to A work with a fee.

3. Be prepared to work really, really long hours.  I mean really long hours.   Every start-up I've been associated with made it cause we were all willing to "pay the price" and sacrifice our free time to see the business succeed.  I would mentally prepare myself to open for business 24 hours a day/7 days a week until you get established.

4. Enjoy yourself.  I'm guessing you're starting your own business in that field becasue you love, love, LOVE doing it.  Cause if you don't - stop now and do something else.  The only way start-up's make it is if everybody (especially the CEO like you) is totally committed and has a passion for what they're doing.  Without that businesses almost always fail.

Good luck!

BlueMars24

February 19th, 2018 at 3:43 PM ^

Sometimes, it's not worth the time. At my startup, the engineering team (me + 2 others) spent so much time fighting with file/login servers and our phone system that we didn't have time to work on the actual engineering we were supposed to be doing. Sometimes, it's worth outsourcing some stuff to the experts. There are tradeoffs. 

mGrowOld

February 19th, 2018 at 3:58 PM ^

I would argue you guys really couldnt DO #2 hence your struggles.  You couldnt really get a "B" grade and needed to outsource that function.  But a lot of people I know tried to outsource everything (HR, Accounting, IT, Engineering, Payroll, Marketing, Sales, Collections, ect) and wonder why they cant make any money.

Start-ups take work.  And sometimes that work is outside your comfort zone and is work (like collections for example) that isnt hard but also isnt fun.

BlueMars24

February 19th, 2018 at 4:04 PM ^

You're right, it was probably C work :). But I can do B work if I had the time. Not keeping up with things like maintenence, patches, and having spare parts caused extra down time. 

I agree with your general sentiment, I'm just saying there are tradeoffs and it's not always cut and dry. I can do IT, it's just not worth my time. We can quibble about if it's a B or C work, but there are cases where you should say here, do this for me so I can focus on the core of my business. 

 

evenyoubrutus

February 19th, 2018 at 3:36 PM ^

Don't hire your friends.

Be prepared for a bunch of your friends to ask you for a job. Do what they taught you in high school about drugs. JUST SAY NO

Don't become friends with your employees.

Be prepared to not make any money for a long time. Oh and don't ever calculate your hourly wage. Ever.

Don't be afraid to be handy. Watch how to fix a sink on YouTube before calling a plumber.

Stay in close contact with your CPA, and make sure he/she has access to your QuickBooks account so they can help you out with that stuff.

rc15

February 19th, 2018 at 3:54 PM ^

Curious of what your explanation is of not calculating your hourly wage. I could see pros and cons of it. I could see it being discouraging if its really low and being tempted to go back to your old job, or cause you to become satisfied/lazy if its really high.

But lets say for the plumber case you gave. If you know you make $100/hr on average, and don't have significantly diminishing returns each hour extra you work, it would be stupid to not hire a plumber for $50/hr.

Blue4U

February 19th, 2018 at 3:33 PM ^

Most people take the safe route and don't take chances when it comes to striking out on their own.  I left the Post Office with over 20 years in and haven't looked back.  Almost every person I knew told me I was crazy to leave a secure job with good pay, retirement and benefits.  I've not missed one of my daughter's games or school activites.  The freedom I have with my schedule is directly related to my decision to take a chance.  Good luck to you and embrace the challenges the same as you would the success. 

antidaily

February 19th, 2018 at 3:39 PM ^

Dont get cute with your business name or domain name. It should be immediately pronouncable, spellable and searchable. Getting .com is tough sometimes so prepend 'hello' or append 'hq' to your name if you can't get the regular domain name. This is always better than settling for a weirdo extention like .io or .pizza etc.

Don't work for free.

fsimmons at gmail if you have any other questions. I work in this industry as well. for going on 15 years.

bronxblue

February 19th, 2018 at 3:35 PM ^

Good luck.  It'll probably feel uphill most of the time, but if you can get a little traction, you will hopefully be able to carve out a nice little market.  That said, everyone I know who started a successful company didn't envision it being huge, and everyone I know who failed thought they'd be a market leader in a decade.  So realistic expectations is probably just as important as any other decisions you make.  Prepare for a grind and you'll be happier.

MgoHillbilly

February 19th, 2018 at 5:00 PM ^

With the camping trip stuff, the surreal painting, and now this, I feel like Dennis may be in some kind of existential crisis. If so, try and figure out what changes have to be made before you throw the baby out with the bath water. Just food for thought. Maybe the job change is exactly what you need.

bronxblue

February 19th, 2018 at 4:43 PM ^

Good luck.  My only concern would be if you have dependents who rely on your income.  I'm assuming no spouse/working spouse and no kids/things like health care provided from somewhere else?  As long as nobody else gets blind-sided here, good luck.  It might hurt to follow your dream, but why the hell not give it a go.

bringthewood

February 19th, 2018 at 5:23 PM ^

It's best to start the gig on the side, if you can. Grow it enough to where you can quit. I know it does not work in every case, but the farther along you can grow and establish a business while still working the better.

My father and brother are both entrepreneurs - small business people. I've spent most of my life in big corporations but have done enough side gigs  - for money or fun - to learn a lot.

Consulting services are mostly sales based. Can you get your current employer to keep you on 25% of the time while you establish more clients? Would they hire you as a contractor? Look for ways to take an adjacent step rather than a leap. Are there other firms that maight be looking for a freelancer?

If you don't have a sales backgound start reading - I'm sure there are plenty of books for sellers in your industry. And by seller I mean marketing, social networking, everything and anything to get your name out there.

BornInA2

February 19th, 2018 at 3:36 PM ^

The death of my father at 54 was a significant factor in my starting a business in 2001.

What I most often say about it is, "If I'd had any idea what I was getting into I'd never have done it. And I'm so glad I did."

It will be hard. You will be afraid at times. This is normal and less impactful if you see it as normal and okay.

Focus on taking care of clients. Spend less time/energy on business plans, procedures, policies, and other non-revenue generating structure.

Invest every day in making your business bettter. At least one little thing.

Keep overhead low.

You will likely be both the best and worst boss you've ever had.

Don't be afraid to set problems down for the night. They will almost always be there in the morning for you. Losing sleep obsessing about them isn't in any way helpful or productive.

Have compassion for yourself. You will make mistakes. Endeavor to not repeat them; lose the guilt but not the lesson.

Wolverine In Iowa 68

February 19th, 2018 at 3:53 PM ^

that until someone replies to your post, you can hit the "edit" button and fix it, you don't have to hit "reply" (thus locking it in) to type a follow up if you have a typo or auto-correct issue.

 

But then again, READING your original post, you've shown your intelligence level already, so it's not surprising that you didn't know...

Wolverine in DR

February 19th, 2018 at 3:36 PM ^

As someone who has had million dollar business, and multiple business failures, the best advice I can give you is take care of your money
Stay away from debt if you can
Reinvest as much as possible
Your partners have their best interest in mind, not always the business.

A2toGVSU

February 19th, 2018 at 3:38 PM ^

As someone who has sort of run my own business in the past (as independent contractor/sole proprietor, never actually established an LLC or anything) I can tell you that there is nothing more liberating than being your own boss. I worked harder and was better to my customers when I was doing it for myself instead of for The Man. Unfortunately, my business was small and was completely dependent on the day to day success of a handful of retailers, so it was kind of feast or famine for me.

I work for The Man now, and I cannot wait to work for myself again. I am hoping to do that by year's end. I detest asking for permission to take a vacation. I also hate that my time has a very definite value. It is far more fulfilling to earn my own value.

WindyCityBlue

February 19th, 2018 at 3:44 PM ^

...and I quit a very lucrative job to do so.  Here are some of my thoughts based on my experience.

1.  The most important thing is that you believe in what you are doing.  You'll no doubt hit some rough patches along the way.  Believing in what you do will ensure you stick through the rough patches.

2. Its a big risk as you know, so make sure all stakeholders (i.e. wife, etc.) are on board.

3. Mitigate the risk by having an out strategy.  I know you probably think your company is going to be a big success, but it doesn't hurt to have a plan if things don't work out.

4. Everything you do in your new business is amplified.  Meaning, when you get your first sale etc if feel on top of the world, and on the flipside, when you can't pay your employees because you are out of money you can't sleep and eat.

5. Take a much lower (if at all) salary in the very beginning and invest it in people that will make you succeed.  Then once you start to succeed, go ahead and take that big salary you wanted.  Several of my employees still have higher salaries than I (but not for long - our sales are about to take off)

6. If you need to raise money, have a good strategy.  I've raised many millions of dollars to date and I could talk at length about this.

7. If you are a services company, splurge on a nice website and any other outward facing marketing stuff.  You need to look tight to your prospective customers.

8. Getting your first sale is difficult, so think through alternate ways to get those sales (i.e. risk-sharing models, money-back guarantees, etc.)

Those are the ones I can think of for now.  Let me know if you have any questions.

Dennis

February 19th, 2018 at 3:53 PM ^

What are your thoughts on freemium models? I plan to cold send materials to businesses with a quick black and white design or series of mock ups illustrating the potential designs I can provide, and then include paid options in the "brochure" for my full suite of services (social media banners, full color logo fleet, special event artwork, etc.)

WindyCityBlue

February 19th, 2018 at 4:19 PM ^

I’m in the medical devices field so freemium models don’t work or apply. And giving out free things is highly regulated by the government. So I can’t really comment on that.

But I can that I work around a lot of different startups and we all collaborate - they all seem to have really unique ways of getting their first sales. It’s so pivotal to the business (ie. their first sale) that they spend lots of time and effort on it. And they only deploy this strategy for their first couple sales before utilizing something more traditional to their respective industry. For example, a startup next to me gave their first sale (a very large account) a super big discount if they could use their name on subsequent accounts they go after. They agreed and worked well for both parties. The startup got additional accounts (or got in the door) just by saying they have this big company as a client.

One other thing I forgot to mention. If you have options/equity in your company, give a little to a handful of advisors that you can call on a moments notice for input. In your case, perhaps find someone who has experience with Freemium models and him/her a little equity.