A friend of mine recently asked me about starting a business. I started my own business Cerebellum Strategies, LLC about six months ago for the book I wrote Business and Technology Integration, blogs, and hopefully some apps I can sell in the Apple Store. Although I haven’t been an entrepreneur for very long, I can sum up my advice into five simple tips. I think these common sense tips apply to any business from a programming company, to a blog, and anything else.
Tip #1 Passion and Skill are the start of any good business!
All businesses start with an idea, good businesses start with a good idea. I love watching the show Restaurant:Impossible with Chef Robert Irvine. Every episode Chef Irvine goes to help a different failing business, but the reasons they are failing are pretty consistent. The most common problem is a lack of understanding about how to run a restaurant. Most of the owners have little or no experience in the restaurant business before making a $100,000 to $1,000,000 investment and becoming an owner. If you are going to start any business, you need to understand those businesses. When I started Cerebellum Strategies, LLC, I knew I wanted to write a blog about technology. I have been in the technology field my entire career. I was very comfortable setting up a server and all the other technology components of setting up a blog. I also had another ingredient, I love technology. I am fascinated and amazed by technology almost every day. In fact, I look forward to testing technology and business ideas and writing about them here.
If you are going to start a business, you need to have experience in the business you are going into and enjoy doing it. If you are a construction worker and you want to open a restaurant, you either need to get a second job in a restaurant or go back to school to get trained. You also need to have a real passion for it. If restaurants don’t interest you, don’t go into that business.
Tip #2 Corporations are People, my friend!
The second step is to legally create your business. There are several options for forming a business, but I found the LLC was the best fit. It gives you a combination of legal protection and doesn’t require you to pay employer tax on the money you earn. You should consult with a lawyer or accountant to find out the best option for you. I also went to my bank and opened a separate business checking and credit card account for my business. Since it is at the same bank as my personal accounts, I don’t pay any fees, I can move money back and forth easily, and I can see it all at one place. The separation also makes it easy to track how your company is doing and provides proof the company is operating as a separate entity for legal reasons. In the United States, it costs about $300 or $400 to setup and a couple of weeks to get setup. If you are serious about a business, this is the critical first step.
Tip #3 Don’t Jump without a parachute!
When you work for someone else, you typically get more than a paycheck. Most companies provide benefits and some sense of security. When I investigated the cost of buying my own healthcare, I discovered poor coverage for a family of four could cost more than $1,000 a month. I also get a retirement plan, training, and the comfort in knowing where my next paycheck is coming from.
When you start a business, you can’t count on a income until you have your business setup, customers, and a track record to know ho much you can expect to make. This was probably the smartest move I made, since my company isn’t generating nearly enough money to support me. If I had quite my job, I would have had to close the business and return to working for someone else very quickly. Instead, I am building my business in my spare time on weekends and the occasional week night. I can sleep easy knowing I have a full time job to take care of the bills. If you have to quit to start your new business, you either need a sizable nest egg or some other guarantee that you will have enough money coming in.
Tip #4 Pinch Pennies Until they scream!
You need to track your budget, expenses, and income so that you know every dollar is well spent and understand how you made every dollar. I spent a considerable amount of time choosing, which vendors to work with and understanding how I made every dollar. If something isn’t necessary for your business, promise yourself you will buy it once you are making a profit. There are several things I would like to buy, but I can’t justify the expense right now. You need to be very careful how you spend money.
Tip #5 Think Small in the short term, Think big in the long term!
If you look at businesses that have been successful, most of the haven’t been successful overnight.
I could go on, but almost every successful business person failed, before they succeeded. Do some people achieve success right away? Sure, but I wouldn’t count on it.
I expect to lose money the first two years. I would like to break even in year three and ideally earn the equivalent of a second salary in five years. I don’t expect to earn anything in the short term, but I have high hopes for five to ten years from now. I just need to put in ten to twenty hours a week of my spare time to gradually build up to a sustainable business. If you expect to make a million dollars as soon as you setup your business, you are setting yourself up for failure. You need to expect early setbacks. However, if you don’t dream big in the long term, you won’t be inspired to keep your business going. That is why I recommend thinking small in the short term and thinking big in the long term.
I wish the best of luck to anyone else starting a business. If you have any questions, comments or advice, feel free to post them below!