Too often, many would-be entrepreneurs spend all of their time planning their corporate structure, getting all of the necessary permits, licenses, bank accounts, and doing all of the other minutiae of business before they actually figure out whether or not they actually have a product or service that someone will pay for.
I advise everyone that asks me, and some that don’t, not to quit their day job until they have actually gone out, talked to potential buyers and had someone they didn’t already know pay for their product or service. Nine times out of ten, what you originally thought was going to be a big hit in the marketplace is a dud, and you have to go back and rework your product. If you spend all of your savings establishing your corporate presence, you won’t have any money left to pay yourself when you have to go back to the drawing board.
In addition to not quitting your day job, here’s my list of twenty things not to do before starting a business:
- Don’t quit your day job.
- Don’t incorporate. Seventy five percent of all businesses are sole proprietorships, and they already make money.
- Don’t get a bank account. Your personal banking account will work just fine if someone wants to write you a check, or if you need to pay for something.
- Don’t rent an office. Work from home. It won’t require a first, last and security deposit. Plus, it’s tax deductible.
- Don’t hire an attorney. What’s an attorney going to tell that you didn’t already know, or couldn’t figure out on Nolo or in a good bookstore? There are only two times to call an attorney: if you’re in jail, or if someone else’s attorney contacts you.
- Don’t hire an accountant. Quickbooks Simple Start will get you going.
- Don’t get a loan. To get a loan from anyone, even your family, will require that you do too many items on this list. And besides, if you get a loan, you know work for the bank — not for yourself.
- Don’t hire anyone. Don’t hire someone if you can do it yourself. For everything else, use contractors and give them 1099.
- Don’t get a business license. I’m not advocating that anyone cheat the government. Once you can sell your product/service, go out immediately and get all of the necessary business licenses and permits in your jurisdiction.
- Don’t try to patent anything. It takes 1.5 to 2.5 years to get a patent. Who knows what the market will look like then.
- Don’t design a logo. You are your own brand, you don’t need a logo.
- Don’t waste time picking a business name. As a sole proprietor, you already have a business name: your own!
- Don’t advertise. Advertising costs money, and takes time to perfect. Selling takes only you.
- Don’t buy office supplies. If you need a pencil, get one out of the kitchen or your son’s backpack. You are working from home, aren’t you?
- Don’t buy any equipment. Outsource everything. Fedex Kinkos can handle all of your printing, and instead of splurging on a postal meter head down the post office. Need something big? Rent it! If it’s not something you can rent by the day, maybe there’s another local business with one. Can you rent it during their off hours in the middle of the night?
- Don’t try to find a partner. What do you need a parter for? Capital? Don’t take loans. Need someone with some sales experience? If you the inventor of your product/service can’t sell it — no one will be able to.
- Don’t join the Chamber of Commerce. Chambers of Commerce have great mixers where you can meet and network with other local business people. Right now, you don’t need to network, you need to sell! Plus, you can always go as a visitor.
- Don’t tell all of your friends about the business that you’re going to start someday soon. Every minute that you spend telling someone you love about your future business is one less minute you have to either try to find someone to buy your product/service or to refine it. Plus, everyone knows an “entrepreneur” that is all talk and no action: don’t be one yourself.
- Don’t write a business plan. Sure you need to know what you’re going to do and how you’re going to make money, but don’t waste time formatting it into a structured plan.
- Don’t get a business telephone number or mailing address. You have a cellphone, use it. If someone needs to mail you something, have them send it to your house. You’re working there, remember.
Photo by yoel.
Update: Lots of people are commenting that these rules are utter suicide for an actual functioning business. That’s true. Once you’re generating revenue, many of these rules go out the window. Until that time, though, stick with the rules.
Arthur Chaparyan on April 11th, 2007 at 9:42 pm
While this advice works for some (very small) home based startups, it’s practically suicide for anything bigger. If you aren’t willing to invest in people, supplies, and equipment, then you aren’t ready to go it alone. It’s like saying “you shouldn’t drive on the streets when learning how to drive, you can do that after you get your license.”
FranchiseBrief.com on April 11th, 2007 at 9:49 pm
I agree with Arthur. This advice is good for someone selling on eBay here and there. It is NOT applicable to a bigger small business! At some point, you will need to incorporate (it just makes sense for tax purposes), you will need to make a business plan and hopefully, you will need to borrow money from a bank to finance some bigger projects…
Dane on April 11th, 2007 at 10:39 pm
I’m not in anyway saying that there’s not a time and a place to incorporate and borrow money — I am saying though that the right time to do so is AFTER you have a product or service that someone will pay you for.
Luke Reid on April 11th, 2007 at 10:46 pm
Dane, I agree 100%, and I think that this is the best post you’ve ever written.
Hansen Defens on April 12th, 2007 at 9:49 am
I don’t know, these are pretty crazy rules.
Thor C on April 12th, 2007 at 1:32 pm
Dane,
Mr. Chaparyan is right - anyone beyond an 8 year old selling lemons is not going to benefit from your advice here.
I certainly agree with keeping expenses down, but to not open a bank account or Incorporating immediately is not smart.
The tax benefits of an s-corp outweigh the cost of incorporating and a commercial bank account is frequently used when determining the time in business - crucial when the time comes to get financing.
No doubt your intention here is to prevent idiots from sinking the family savings into a new widget, but your advise is more likely to hurt (those few lucky individuals that might succeed) then help those that won’t.
Cris Zimermann on April 12th, 2007 at 2:14 pm
There’s a big thing I’ve learned from you, Dane: A business plan we write down every minute of the working day as we build up our business without loosing the spontaneousness of the best moments.
Great article!
Mr Money on April 12th, 2007 at 2:32 pm
Have u all boys started big? I challenge entrepreneurs that never played by ear! Would u all incorporate and set everything up before feeling the market? That’s mad! That’s what i would call suicide at it’s best!
Kanudan on April 13th, 2007 at 1:07 am
Hi Dane,
Its really Great article thanks …………
Mrs. Anderson on April 13th, 2007 at 6:18 am
I disagree with:
#3 - Never MIX business and personal funds
#9 - That is just asking for a FELONY
#11 - Logo’s are important symbols for your business
#12 - What? That sounds crazy. What if your name is Olive Cox?
#13 - Ever heard of FREE advertising - It exists
#14 - No it is not appropriate to steal your kids school supplies in order to conduct your daily business
#15 - Kinkos, the post office - I will be spending valueable time running from store to store while my competitor prints his stuff within seconds.
#20 - Are you nuts? This is a HUGE security breach and should NEVER EVER be done.
I would never just hand out my HOME address to potential clients.
Micah on April 13th, 2007 at 8:55 am
I’ll have to agree with Mrs. Anderson. I have to give you points for willing to go against the norm, but I personally think that several of these ideas are bad ideas.
Jake on April 13th, 2007 at 9:49 am
There’s a fine line you have to balance, between ensuring you’ve planned everything well and losing that momentum or spontaneous energy necessary to actually start this thing. I say if you find yourself getting bogged down by all the little details, absolutely you’re allowed to skip *some* of them and clean it all up later — Dane’s right, you have to get out there and SELL.
But, there’s reasons why so many start-ups fail, and having a solid, well-thought-out business plan is mandatory if you’re planning on running your business for more than a year. Got an exit strategy yet? What are your actual objectives in starting this thing? If you can’t manage all the details, maybe you aren’t ready to go for it yet.
jeff freeman on April 13th, 2007 at 9:53 am
If Dane’s idea was to spark conversation and deep thoughts about your business then his post succeeds. If ANYONE takes his advice verbatim, then they get what they deserve. This point, I think, is to analyse what you as a business owner and your business needs.
We have a medical services company that we have not incorporated [malpractice in our area is almost unheard of, although we will be incorporating within the next 2 years - why? - taxes], that uses our cell phones [land lines are mostly a waste these days and don't talk to me about the need for a fax line - that is what computer faxing is for] , that doesn’t have a logo [don't need it yet], that uses a home office for all office related work [tax write off!], but that also rents a space in other offices to see clients in [looks more professional and takes a fraction of the cost of maintaining your own lease]. I think that you should have a business account because mixing business and personal finances is just asking to be rammed up the a$$ by the IRS. We use an accountant [but only for taxes - everything else is on QB] and have actually made money on the deal in extra savings she was able to find over what any of the computer programs suggested. We did spend one evening [while watching a video] coming up with a business name that we like for the purpose of branding and cheap promotions. Our advertising budget, other than the yellow pages ad [which we took out at the end of our 2nd year], is mostly word of mouth and community education classes, that we run. We have recently branched out into doing larger conferences, but we don’t spend money on a booth as we tend asked to come as a speaker.
Most of this was accomplished without a formal written business plan and with ZERO outside financing. This worked for us. It might not work for you. Check out your situation and then take the main thrust of Dane’s advice which is - don’t spend money on anything just because you think you should.
Always look for alternatives and do without if you can. As your business grows, so will your needs. Pain is a good indicator that something needs to change.
JJ
Leonard Klaatu on April 13th, 2007 at 10:52 am
Perhaps I didn’t read it as many did. It seems to me Dane’s point is, “Don’t put the cart before the horse.” People spend too much time in non-income producing activities before they realize they may not even have a business. I don’t think he’s at all speaking of a well-funded company launch. It seems decent advice for a personal start-up (he begins with point #1 - don’t quit your day job). All of these things are perfectly legit IN TIME. However, I’ve known many, many people who spent money establishing an LLC, hiring an accountant, getting all the licenses, even renting space only to find they don’t have a business. They’ve got a dream, or an idea. They have no viable business. And in the end, they’ve lost time and money. Have something to sell, have somebody willing to pay you THEN do these things. That’s how I read the post. But perhaps I’m an idiot. I’ve only operated multi-million businesses for over 3 decades.
bizdig.com on April 13th, 2007 at 12:16 pm
Dane’s advice is all about survival. To succeed, a biz has to survive first. Therefore, cut down the cost and minimize the unnecessary expenses (and structure).
But keep in mind, the ultimate goal for a biz is to find the customers (so make sure the product/service meet some market need first), sell to them and make the profit.
Therefore, I don’t agree with Dane’s advice #18. I also agree with the comments above that most of these advice are for very small biz. They are good ones though.
Thanks!
AJ on April 14th, 2007 at 2:02 pm
These rules are moronic. Unless you are opening a lemonade stand in your garage, I can’t think why or how they’ll work.
Martin on April 15th, 2007 at 2:13 am
All I can say is that they worked for me. But I’m in the UK and our rules are a bit different. The only caveat I would add is that I did open a separate bank account (free) and I did get a PO Box, fairly soon after starting up, to protect myself from the morons who knocked at my door at 11pm.
Dane’s basic message, as I see it, is to make sure you have a sellable product before committing money to anything.
I can assure you that Sir Alan Sugar (Amstrad) started his multi-million empire this way, too.
Lucio on April 15th, 2007 at 4:15 am
BullShit! I’ve never ever read so big busllshit in my life.
What kind of advise is it?!
panuta on April 15th, 2007 at 6:22 am
That’s great advices. It help me understanding an essence what really I should focus on when starting a business. Time is money.
Nermine Nour on April 15th, 2007 at 7:35 am
it so different from country to another i would like to share with you my experinces
Nermine Nour on April 15th, 2007 at 7:42 am
it is different from country to another
i am from egypt
Nermine Nour on April 15th, 2007 at 7:45 am
it is the same that i am trying to tell you it is different to implments those points in USA than Egypt
Rome on April 15th, 2007 at 7:02 pm
Really nice! I agree 99%, but I think logo is important to communicate your biz.
Harry on April 16th, 2007 at 10:45 am
Good thing I did not have your “advice” when I started my first business at age 15. I would not have retired before I reached 30 had I followed such bad advice.
I feel sorry for all those who may actually think you have more to offer than the common sense of a teenager!
H2 on April 16th, 2007 at 12:48 pm
The point of the article which some of you don’t seem to get is to not go through the trouble of setting up a Corporation until you know the business you have has proven itself to be viable.
It’s better to setup a Sole Prepriertorship, then incorporate later when sales start to take off, then to immediately incorporate only to find out that your profit margins for the first quarter don’t cover the cost of incorporating.
Keep in mind, 9 out of 10 business’ fail within the first 5 years. So the odds are against you right from the get go.
H2 on April 16th, 2007 at 12:57 pm
About the only point I am not totally in agreement with is “Don’t advertise”.
If people don’t know you exist, you can’t sell. Sure you do the old cold-call and soliciting routine, but in most cases it’s not as effective as advertising to drum up new leads.
Besides, it can be done at minimal cost. It’s amazing what a free online ad or a small print ad in a newspaper can do.
Bryan on April 16th, 2007 at 8:09 pm
Cut the bullshit. No logo? No business plan? Are you serious? Your formula results in an entity that I would never do business with.
Go strong or you don’t deserve to be in business.
JTreiber on April 16th, 2007 at 9:10 pm
My first response to this post is that the advice depends on the start-up. It cannot be applied across all start-ups. Are you opening up a dry-cleaners or starting a software company??? You may not need everything on that list right off the bat, but things like branding and corporate structure are important if you’re looking to build credibility in the marketplace and potentially raise outside money.
Not having a corporate structure and using your personal address is a terrible mistake. They call it a Limited Liability Company (LLC) for a reason, and if you want to run the risk of getting sued by a client and losing your home because you aren’t isolated from that risk, it’s your fault. God invented PO boxes at the post office for a reason. It’s convenient and pretty cheap and way more secure than using your home address. I believe that this pertains a lot more to home-owners than to renters, as most start-ups founded in an apartment (including ours, OnCard Marketing) for brief periods of time until cash flow can support some modest office space.
Moreover, I think that while most of these points are suboptimal for any entrepreneur from the beginning, they are also all not feasible over the long-term. These are short-term fixes to save money, and with most of them, you are probably doing more harm than good.
Marie on April 17th, 2007 at 5:33 am
Yeah. You, your business cards and go, go, go… SELL! Jump with no parachute. You might look like a true E.T. or not.
nakedjonny on April 17th, 2007 at 2:07 pm
As already mentioned, unless you are simply selling on ebay the above points are complete suicide for a business. You will never get ot off the ground…period. If you wanna find out some real life dos and dont’s of starting a business check out nurtur.co.uk/naked blog documenting my companies journey
John on April 17th, 2007 at 9:06 pm
I would guess that those who are screaming the loudest about this advice are the ones who haven’t started up their own business yet or are not familiar with the start up process of the majority of micro businesses. I have set up accounting systems for over 200 small businesses on QuickBooks, MYBO and others accounting programs as well as starting a number of businesses myself over the past 20 years.
Dane is right on, for the majority of small business starting up. Yes, as soon as you get going you will want to do a number of these things right away. But many of them are just a waste of time until you actually have a product. I have never seen a list like this before but as soon as I read it I said, Yes, that’s my sentiments and experiences, this is one of the smartest list I’ve seen for small start ups.
They just need to be very aware that they need to be ready to do a number of these things as soon as they really need them. Even after they get going incorporation is very seldom a good idea especially if they can do an LLC so cheaply in most states.
Bill on April 17th, 2007 at 9:40 pm
I have to say, I thought this article was a sarcastic spoof while reading it.
Judging by the comments, apparently its not.
Chris on April 17th, 2007 at 9:45 pm
Leonard responded best of all:
“It seems to me Dane’s point is, “Don’t put the cart before the horse.â€? People spend too much time in non-income producing activities before they realize they may not even have a business. ”
Exactly right. I almost incorporated once and only then for tax purposes when it seemed like it was worth while to do. In my country, it’s only really important to incorporate if your business income is over $200,000. Since that almost but didn’t happen, I haven’t bothered since.
Did anyone who commented negatively actually read the title of this article?
“20 Things Not to Do Before *** Starting *** A Business”
Great article Dane. Seriously, I’ve had a few entrepreneurial slip ups over the last 12-13 years and I can tell you the years where I did everything “by the book” (ie: buying lots of office supplies, renting a postal machine, getting a business license, almost incorporating, etc). It got me nowhere. Frankly all those “things” were nothing but a distraction from creating/distributing/design whatever product/expertise that I was trying to sell.
Excellent article.
Steve Wilson on April 18th, 2007 at 2:34 pm
Dane -
I kept waiting for the punchline. I was laughing as I read through most of these rules, thinking it was some sort of “April Fool’s” joke at the end. Most of these rules are destructive.
#2. In some cases, it is suicide to not incorporate or form some liability shield. Depending on your product or service, a sole proprietorship can open you up to lose all of your personal savings and assets if you get sued. You must at least consider the benefits of forming a business entity.
#3. This is insane. NEVER comingle business and personal funds, no matter if you are a small startup or an established business. First, it a nightmare for recordkeeping purposes. Also, if you don’t “behave” like a business, the IRS could determine that you really are not a business and disallow your business deductions. Also, a court could “pierce the veil” of your business entity and hold you personally liable if your personal and business affairs are not separated.
#5 and #6. I agree with too a point. When starting out, you don’t want to have an expensive retainer fee. But sooner than later, you really need to have some legal advice if you are signing any kind of contracts. And a good CPA or attorney can help you out with #2.
#9. A business license is a declaration of intent to operate as a buiness. It is not appropriate to wait until after you sell something to get a license. You are operating as a business before you sell anything, and thus are legally required to declare your intentions. Further, this could jeopardize you ability to make the first sell, because many businesses will not deal with someone who does not have a business license. Having a business license is the legal and ethical thing to do from day one.
11. You may be your own brand, but a simple and inexpensive logo can lend tons of credibility to your business pitch.
17. While you may not need to joint the COC, you should be involved with some sort of networking group. Networking is the best opportunity to sell for many businesses. Plus, you might just meet an attorney or a CPA who ca offer some free advice and keeo you from making mistakes 2, 3, and 9.
I understand that your intention is to focus on the most important stuff first and not to get carried away with things that don’t matter. But I am shocked that you wuld advise people to forsake professional advice that could keep them out of hot water.
redshox on April 20th, 2007 at 12:21 am
it’s inspired me to build my own business.
Mike on April 20th, 2007 at 6:01 am
I found these to be really interesting, but I thought that it was worth mentioning that there are a lot of cases when it is a good idea for someone to find business partners for their new venture.
A great example would be if someone had an idea for a new product, had worked in sales/marketing, and was confident that they could sell the product. But, if they didn’t have any experience engineering a product, and didn’t have a ton of extra money sitting around to hire an engineer (mechanical for making a part, electrical for designing circuits/electronics, etc.) finding a business partner who is an engineer might be completely necessary.
Otherwise, while I can’t say that I agree with all of the points, there do seem to be a lot of businesses that turn out to be successful who’ve used some, or many, of these rules.
Joshua Smibert on April 21st, 2007 at 12:11 am
Brilliant mate! Normally I don’t leave notes on Blogs… Too Busy! But I couldn’t resist!
I think people are in a stir because most of them have done almost every item on your list. I know I have. It wasn’t until I thought back to the businesses I have started and realized that so much time was spent building an idea, I often neglected seeing if it would work.
Good on you for making people think.
Ultimately every item on your list would need to be done for a successful business. But it is not dangerous or legal suicide to work out the bumps for free. Once you know there is potential, you can figure out perfecting it.
Reminder folks..the title was: twenty things not to do **before** starting a business! Emphasis on the ‘before’.
I have completely funded more than one startup by just beating the bushes and talking to people. Its free, will make it obvious whether its a viable business and will help you as you then plan. Thanks again.
Brian on April 21st, 2007 at 7:49 pm
This is ALMOST really good advice. I like the general premise of ignoring all but the essential, and not wasting money, but disagree with these:
2, 3, 12, 17,
xbacon on April 23rd, 2007 at 7:02 am
I dont agree 100%..
If you wish to grow up, you need a business plan, this can be simple, but you need it..
A business mail have a low cost and show to your client that you are a professional..
I live in Brazil, and i dont now about your taxes, but here, is too high!!
The first item, I consider the most important tip!
NEVER QUIT YOUR DAY JOB until your new business its will be relieving!
Nice post!
See ya!
william anderson on April 23rd, 2007 at 9:30 am
i agree with most of the points above, and totally agree with the central idea of how to get started in starting a business or even thinking about starting a business.
naturally, not all of these points will work with my situation, but common sense will weed out which ones will.
nice post!
OneRover on April 23rd, 2007 at 11:33 pm
I don’t agree with Dan on points 3 and 19.
Overall an excellent post.
Cheers!
Joan on April 25th, 2007 at 6:28 am
You forgot one crucial advice. Don’t build your business without taking time to discover who you are and what your passion, interests and life skills are. Passion is the key ingredient to business success and will keep you marching on through the rough times. Want to make a living doing what you love? Check out the New website below!
Joan on April 25th, 2007 at 6:31 am
Apparently you’ve got to click on my name (Joan) to get to the new website…
Dr. Jack Ryan on April 27th, 2007 at 8:53 am
#2 Initially, it’s ok to start as a sole proprietor, but for me, in my state, I formed an LLC. Why? To protect my personal assets, especially my homebased business and it adds legitamcy to the business on my letterhead and business cards etc. In my state, I am exempt from registering with the Register of Deeds in my city BECAUSE I am registered with the Dept of State of my home state. Fees vary from state to state. In my state, $125 one time fee and $200 every year for renewal. Small price to pay to protect your personal assets.
#3 CARDINAL RULE - Establishling a business checking account adds legitamacy as well as a first step in financial management for your business.
#9 YOUR ARE ASKING FOR TROUBLE. In my city, a business license is required and for homebased businesses, a one time zone permit depending on the type of business.
#11 No logo/business name? Your reason is not good enough. While it is not necessary, but it distinguishes you from the rest of the long list in the yellow pages….an intangible asset maybe?
#12 See my response to #11
#13 You can advertise free on Google and Yahoo. Of course, you can pay a monthly fee and upgrade your account.
#19 Wrong. Every new start up needs some kind of plan; if nothing else write down what you want to do and the company’s goals and objectives.
#20 Wrong, stupid. There was a time you could do that, but, if you have a home based business, you need a 2nd phone line for your business. I don’t want a client calling me at night on my home number or mobile number. I have a family and children and they need attention. I have a mailbox with a local UPS store. Not only do you get a mailbox, but a STREET ADDRESS, access to copiers an fax machines and 24 hour access. Yes, it is a little more a month than a USPS box, but the UPS store works for me.
Kathie M. Thomas on April 28th, 2007 at 12:46 am
I have to say I have done many of the things that are on that list and have not regretted it.
I have been in business over 13 years and still work at home in a dedicated office.
I did register a business name which was the best thing to do as I now manage a team of over 200 Virtual Assistants who all say they’re a member of… - they couldn’t say that if I was only using my name.
Having a business name meant I did need a separate cheque account and I really did need to separate business from personal so I could be sure of having some spending money in my personal without worrying about using business funds.
I do have a logo and my team use it - which has been great for branding!
Having a separate phone number for my business has meant I can get some peace in the evenings, on weekends, during meetings or time away if I wanted to. I can always divert the phone to my mobile phone if I need to but usually, if I’m going away, I can divert my business line to one of my team and still receive only personal calls on my mobile phone.
Oh, and I love networking and going to business events. I’m the secretary of my local chamber of commerce which has helped develop my profile on a local basis.
Ron Amos on April 28th, 2007 at 5:07 pm
When you have sunk a bundle into starting a business and then don’t have enough money left over to cover the first couple of years expenses,
then you might pay more attention to what Dane has said.
Tom on April 29th, 2007 at 2:45 pm
Dane,
I think if people keep in mind that what you’re talking about is the time BEFORE you actually start the business, most of your advice makes sense.
However, the minute you are writing checks to people, paying others to do work, etc…you are RUNNING a business. The second you get to that point a lot of your advice falls apart.
You need to create a separation between you and your company as soon as you start doing buiness. This means a separate checking account, some kind of incorporation–all of these are tools to protect your personal assets. the separate phone number and a PO box as soon as possible are a helpful as well.
I also disagree about the lack of a business plan–unless you are a microbusiness with no plans for growth other than “sell more” you should spend some time to think about what kind of business you’re in, what your market is and what you’ll need to do to grow.
I understand your point. You don’t want people to pay a top flight graphic designer to put together your letterhead before you have your first sale, but some of your advice needs to be cast aside very quickly once you get the business running.
I’m a little over three years from the time I started out as a sole proprietor. I now have seven people on my payroll–growing to nine over the next couple of months.
Also, beware the 1099 once you get started. If you’re hiring people for specific projects, that’s fine. If you have someone showing up to do a variety of tasks, and you provide them a place to do those tasks–they are an employee, at least in the eyes of the IRS. They’ll want their back taxes.
Get legal advice once you start doing business, if you want to stay in business. Once you get going, some of this advice can land you in jail, put your personal assets at risk unnecessarily and doom you to looking like a little guy.
This is a great time to be in business. A time when a small business can look big. Don’t rush in to spending a bunch of money too soon to play with the big boys. But, if you learn you market and figure out what it is that makes other companies in your area look successful, you can appear bigger than you are by doing exactly some of the things on this list….once you start making money.
craig on April 29th, 2007 at 4:47 pm
This is the worst startup advice I have ever read. Don’t open a bank account?..don’t make a business plan?..don’t get a patent?…and countless other ‘rules’ you have written….come on.
Susan on April 29th, 2007 at 10:38 pm
I have to agree with Craig 100%. WhenI first started reding the information I thought it was a send up, then I read the comments and realised it was for real, sorry it is the worst advise I have seen regarding business startups.
Chell on May 1st, 2007 at 11:18 am
Most of the advice in the list is frugal, and inpires to get the business going, work hard, rather than waste time talking about it and daydreaming. It makes sense to invest more as needed. The one thing I disagree with, though, is setting up a business address. A post office box can be a good thing for not only the privacy of your family, but for looking a bit more professional. All in all, great post!
John Jackson on May 1st, 2007 at 9:38 pm
To late.
Jim Peake on May 2nd, 2007 at 1:45 am
Dane makes a lot of sense here in my view what he is saying that is not being taught in a lot of circles is that you have to prove your business first then plan your business and lastly start the business. We subscribe to the same formula and take it one step further and then mentor the entrepreneur on what to do next with the Ultimate Business ToolBox. I’d love to see instead of a business plan contest in the colleges a “business proof of concept contest.” Have them make $1,000 before they do their business plan.
dolce on May 2nd, 2007 at 2:31 am
This posts has a lot of truth. nice!
mehnaz on May 2nd, 2007 at 4:24 am
The advice is good for business startups. I have also been reading series of articles written by Sramana Mitra, leading Silicon Valley Entrepreneur & Strategy Consultant on Bootstrapping. Please read Is Bootstrapping Becoming Sexy Again? by Sramana Mitra.
Jeah on May 2nd, 2007 at 9:38 am
What a strange advices?!! We have to generalize not all Do’s and Don’t s can be considered good or applicable. In this case, may this may help for save money but cheating is not the key. Business must be business, whatever it is, you should put up a capital.
If you want more tips about starting a business (different from this), you can check http://www.fourhourwork.week.com or purchase a hardcopy at http://snipurl.com/1ilc1.
Thank you!
Carmen on May 2nd, 2007 at 12:02 pm
I would have to disagree on not wasting your time on a business plan. Although it may seem like an academic exercise, if you can’t sit down and define what is you are selling, then how can you explain it to someone else? Also, if you are trying to focus your efforts during the startup phase of your business on areas that produce the biggest return, a little research on your target markets might not hurt.
But if the issue is avoiding spending a lot of money on a concept that is not yet tested, I would check out the article that was printed in the New York Times back in September 2006 on “Running your business on tag sales prices”. There were a lot of good resources to get things like marketing collateral and 800 phone numbers for low prices.
Steve Riley on May 2nd, 2007 at 5:30 pm
I agree with the general intent of this post, but everything is based on conditions and qualifications. It’s tempting for someone starting out to throw everything into a business and since most fall on their face - start small and grow.
That being said:
# Don’t quit your day job.
This depends on a lot of factors. If you are serious about your business quiting your day job even for small startups can be the best thing in some cases.
# Don’t incorporate.
This depends on your tax situation. C corps have some amazing write-offs that a CPA can tell you about in full - even if you make no more money than your day job did.
# Don’t get a bank account.
This is easy and makes you look professional. I would suggest getting a bank account. Especially if you use a business name. Someone will accidentally write checks you can’t cash if you don’t.
# Don’t rent an office.
I agree with this one on the saving money front. However working from home can be hard for those who are new to it because of distractions. And remember lots of times you can’t write off your home use - this is one tax area that is most easily “popped” by the IRS.
# Don’t hire an attorney.
Agreed. Until you need one they will cost you an arm and a leg.
# Don’t hire an accountant.
I set up a C-Corp and use a CPA for my taxes. The benefits of a C-Corp for me easily pay for themselves in the tax dept.
# Don’t get a loan.
I definitely agree here. If you can’t start making money from day one you’ll probably have an impossible time getting one anyways.
# Don’t hire anyone.
Agreed - grow organically as you need to.
# Don’t try to patent anything. It takes 1.5 to 2.5 years to get a patent. Who knows what the market will look like then.
This is a no brainer unless you are a very special case.
# Don’t design a logo. You are your own brand, you don’t need a logo.
A logo doesn’t hurt - make it professional if you have one. A bad logo is worse than none at all.
# Don’t waste time picking a business name.
This is free. If you ever intend to grow you’ll want one. I say pick a name and get excited.
# Don’t advertise.
Agreed here. You start selling yourself and if you’re lucky you’ll market yourself later by advertising.
# Don’t buy any equipment.
For stuff over $15k agreed. Everything else - go
ahead and buy it.
# Don’t join the Chamber of Commerce.
Agree with this from the standpoint of being
frugal.
# Don’t tell all of your friends about the business that you’re going to start someday soon.
Do it and don’t plan to do it later.
# Don’t write a business plan.
If you aren’t getting capital and are new to things you probably have some lessons to learn. Write a detailed business plan after your first year. By then you will have a clue. Anything earlier will probably be wrong.
# Don’t get a business telephone number or mailing address.
Too cheap to pass up on. Why not do it?
shahramkel on May 3rd, 2007 at 3:53 pm
I’m trying to decide whether or not to start up a bar, so some of these points won’t work for me. Others gave me reason to think - thanks for the article!
trond on May 4th, 2007 at 12:23 am
It’s refreshing to read your list, Dane. Having participated in starting a small business in France, where I live, it’s great to know there are other, far more pragmatic and simple approaches to starting a business than in this bureaucracy-ridden, pseudo-communist country, where you’ll spend 6 months of hassle just in order to be ALLOWED to sell anything … ;-)
Tim on May 4th, 2007 at 9:55 am
I agree with nearly everything except incorporation. You should incorporate in Nevada. Asset protection is one of most common things overlooked in small businesses. Did you know 1 in 3 business owners gets sued, we live a lawsuit happy society. Why risk all that you have worked so hard to earn by not incorporating?
Cheng Cheng on May 5th, 2007 at 12:32 am
hi , I totally agree with you if you have not thoroughly done the market research yet.
It is true you should not do those things.
However, if you have tried selling to a stranger and did a trial test and it works, then you should think again.
Sometimes, we do not know how we are going to succeed but as we go along, we get more ideas on the way and more help.
You must change constantly if your idea does not work and test some of the ideas out.
You can still so it if you are willing to do it, believe it and attract what you want by changing your thoughts.
Read this report by Bob Proctor and it will enlighten you on your ability to attract what you want in your life.
http://www.visualizationexercise.com/rights
baloot on May 5th, 2007 at 11:47 am
hey, are u sure this 20 things not to do.
i dont think so.
because, its quite funny u know..!!
anyway, nice post. i’d love this one..
its make me thinks sometimes..
dydve on May 5th, 2007 at 9:17 pm
that one ever wholly recovers from a disappointed passion dot Such
google.cpm*
snuffbox as usual in his hand and hurried up to Flemming whom he
douglas crossley on May 5th, 2007 at 10:24 pm
Dane,
I just stumbled upon this site and was reading it and with all due respect I have to say you are WAY off on a couple of things.
Firstly everyone should know that not EVERY ONE is a business professional and can run a business never mind a succesful one. Most Americans are worker bees and should remember that. But if you are going to attempt to run your own business you better be ready to go all out because if you slip up and fail you are going to loose big time. Remember you don’t “try” brain surgery. You either do it or you don’t.
A couple of points you make are great ones and I am not totally discrediting the whole article but a few things that you may need to re investigate are listed below.
#3. Dont get a bank account. If you don’t get a seperate bank account and if and when you get audited it will be a NIGHTMARE to seperate or justify anything to the IRS. Also you need to see how the company is doing not how YOU are doing and considering most banks let you open a FREE business account (and sometimes give you free stuff to do it) you are crazy not too.
#5 Don’t hire an attorney… Most attorneys will do work to help you set up your company for free or little money depending on the type of service or services your company will provide assuming you will use them exclusively for said services. To not have ANY legal representation or advice in your back pocket is asking for trouble.
#6 Don’t hire an accountant… Unless you are a CPA this is financial suicide! How are you going to know every tax code and how to plan your business and deductions. And when the time comes to hire an employee or 10, you will want the ground work set up. If you are solely using a CPA to do book keeping and pay your company bills I agree. However for tax reasons you NEED a CPA to hold your hand so you don’t screw up.
#9 Don’t get a business license??? I don’t even know where to start with that one. I know where my business is (Rhode Island) if you don’t have EVERY duck in a row then you will loose everything. If you are saying don’t get a license till you are 100% sure you are moving forward then I agree… Just like you wouldn’t buy the furniture until you are sure you have a house.
#11 Don’t design a logo? Why would you not design a logo? You can have an art student from a local community college do it for LITERALLY $50.00 or less and can put it on your business card. Don’t spend $1,500 on a logo I agree but you need something so people take you seriously.
#12 Don’t pick a business name… Who wants to do business with someone who only uses their name? I own a mortgage brokerage and my name is in my company name… but if I just said Doug… that would look a little shady don’t you think?
#20 business phone # and address. How are you going to get correspondence? Do you want people calling your house to tell you the price of office paper. It is so cheap now for a PO box and a virtual phone number or… Even a cell specifically for business. You are selling yourself short.
I am not sure if you aimed this article on someone who wants to be self employed selling balloons at a parade or someone who wants to start a federal savings bank… But I think there needs more clarification who this is directed at because the ones I listed are fundamentally wrong.
Thanks for the article though.
P.S. Sorry if some of this is grammatically incorrect it is 1:30 in the morning when I am typing it :)
rfbvd on May 6th, 2007 at 3:37 am
bear up against public opinion and push back
poor jerk on May 6th, 2007 at 9:09 am
hi pal,
Happy to pass by your blog.. What you wrote is great… Care to chat more online?
Hope you can link me up too ?
Sebastian on May 6th, 2007 at 9:24 am
Very intresting post. Of course not every tip is the same for germany. :-) But the crazy people will win the race!
Catherine on May 6th, 2007 at 2:41 pm
i can’t believe you actually wrote this and suggested that what you are saying is a good idea.
Catherine on May 6th, 2007 at 2:42 pm
P.S. the one thing i agree with is #1 DONT QUIT YOUR DAY JOB!! atleast not yet.
douglas crossley on May 6th, 2007 at 9:02 pm
catherine,
i think we are on the same page
Griffin on May 7th, 2007 at 2:32 am
Dane,
I agree 110% with everything you’ve stated in your article. I knew a woman who did everything “right” — forming an LLC, getting a license, networking with a local chiropractor (a related field), making a logo and hiring someone to make signs, and renting commercial space in a strip mall. Guess what? After two months, she closed shop without ever having had a single client. She is great at what she does and everyone in the area knew it. Her biggest issues were not making sure that she had a market in that area and not making sure that she had prospective clients that would travel to that area.
Remember that this is everything BEFORE starting a business. In fact, I haven’t had to do most of the things on this list while running a successful business (that I bootstrapped and went into the black a MONTH after going full-time). If you can’t afford to spend the money — don’t spend it! It’s as simple as that.
You don’t have to have a formal business plan to plan your business. Don’t bother making projections when in reality you have no idea how it will turn out. Just do the best you can and hope for the best! You only need a business plan to show to investors when/if that time comes, and if you do a valuation of your business you have to count it as an asset!!! That can seriously hurt you (or your child) when applying for scholarships and other college financial aid. (If you’re making $25′000 per year but your assets are more than $500′000, you’ve got a serious problem). Had I completed a business plan, I would not be able to attend college this summer.
In most districts you don’t need a license to operate a home-based business, and in those that require you to you generally have a 30-day grace period. Check your local laws.
Most small businesses NEVER NEED A LAWYER (an attorney told me that), so putting one on retainer is a waste of time. I don’t need a lawyer or an accountant to tell me to “stay the course” or to write up my site’s Terms and Conditions. Go to the library and read a book or two on small business law and small business accounting. If you screw up and need an attorney, THEN you go to a lawyer and put them on retainer.
Another thing: Why does everyone act like it’s so hard to make a spreadsheet to track expenses on your account? Every day I spend a couple of minutes adding things to a spreadsheet and noting what category of cost or who’s paid me (it would take just as long to note it for an accountant). Not a big deal.
Everyone seems so afraid of putting a little extra time into their startup! GUESS WHAT? YOU’RE NEVER GOING TO RUN YOUR BUSINESS FROM THE BEACH!!! FORGET IT! You HAVE to be creative when you’re low on money and are about to start a business, otherwise it will fail before the ink is dry on your LLC paperwork. If you have $50′000 to invest, then go ahead and buy that $900 copier if you feel like wasting the money, but don’t come crying to serious entrepreneurs when your dream goes down like the Hindenburg because you wasted your seed money on hiring people you didn’t need and doing things you didn’t HAVE to do.
If you HAVE TO HAVE something on the above list to be in business (like a license), then GET IT WHEN YOU ARE FORMING YOUR BUSINESS — not two months before. That will also save you some money since you won’t have to renew everything as fast.
Sorry to be so screamy, but most of you aren’t seeing the big picture. In fact, most of you must be in an entirely different sector, because I don’t need office space to run an online business. I’m not running a Wendy’s here — I don’t need a restaurant or an attorney or large-scale funding. I just need basics like my computer, my knowledge and industry-standard software. I don’t need separate office supplies or a lot of equipment — I can use what I have already.
If you absolutely, positively need something big for your business (office space or a license) you can get it the week before launch. Having it two months before launch isn’t going to do you any good.
M on May 7th, 2007 at 9:00 am
i think the author was misunderstood by a lot of people.
my mouth was first open and i was in shock after reading the 5 line, but after that initial shock, it makes sense.
too many times, we have an idea and we run with it … doing all of the licensing … location .. hiring …
i’m doing that right now. but in the back of my mind, i know that i have to talk to my customers to see what they want so i can tailor my service to them.
how effective is a business plan (which i’m starting right now) without knowing your customers first (who i have not gotten to know).
for me, this is a good reminder to first find a service/product and then to see if people will want it or pay for it BEFORE SPENDING ALL YOUR MONEY.
he advocates using your own personal checking account to pay for the little things like printing or whatever.
why spend all the money on the logo, incorporation if it turns out no one wants your product!
thank you for this strong reminder to focus on the customer first.
Jeah on May 8th, 2007 at 9:50 am
Well, these may sound strange to us, but who knows these will work best than the traditional things that we do. Sometimes, we should try other experiments, and find out what will be the result.
Why don’t we try these things, and then comment later. If this will work better, then continue, else go back to the old. It would sometimes depend on how the person applies new ideas to his life.
Also try this: The 4-Hour Work Week
Jim Donovan on May 8th, 2007 at 6:37 pm
Sorry, but this has to be the daftest advice list I’ve seen. While I agree about keeping initial outlays low, I’d tell people to do most of the things this list says don’t. You’re trying to start a business, not a hobby. This list is for amateurs.
Stefan on May 9th, 2007 at 6:58 am
Great, I agree 100%. Really well grounded and I can smile benignly about it.
Sara on May 9th, 2007 at 12:10 pm
Great advice, Dane!
I know lots of people who are always talking about the great business they’re going to start. They spend time on logos and business cards and promise their friends jobs and all of this is done without even know exactly what they’re going to sell.
For a very small home-based business (especially web-based) it’s a waste of time and money to spend before you earn.
As someone attempting the very thing you’re talking about, I often find myself frolicking in the land of snappy business names and expensive office machines. I’m going to print out your list and hang it in several places to snap me back into reality and remind me to keep my focus.
Thanks,
Sara
Don on May 9th, 2007 at 8:53 pm
Funny,
I came up with the same exact list on my own after trial and error.
Been working at home, for profit, by myself, ever sense. Six years now. Some types of businesses fit this mold exactly, others don’t.
Rule of thumb? THINK!
BTW
Unless you want a tax audit, don’t incorporate.
If you do incorporate, you better keep your books and corporate minutes 100% in tact or the corporation will be easily breached in a law suit…you then become the responsible party, not the corporation.
Jim Donovan on May 9th, 2007 at 9:23 pm
Update 10 May 2007: I’ve received a very nice email from Dane Carlson, the US author of this list. His rationale is worth sharing:
‘I understand that all of the items on my list will need to be done at some point, but too many would-be entrepreneurs hold themselves back by attempting to complete all of these unnecessary actions BEFORE they actually find someone to buy something and determine whether or not they have a viable business.’
In other words, folks, En Avant! (Get Going!) Now that’s something I can agree on.
Roger Anderson PhD on May 10th, 2007 at 12:00 pm
If this post makes people stop and think before they follow some one-size-fits-all model then it has succeeded. This is great advice as long as it is taken with the understanding that at some point these things need to happen for most businesses.
I disagree with the comment that most people are sheep. We are not sheep but we are often afraid to venture out into the unknown. I prefer to think that we are all Modern Magellans looking to find places we have never been before.
If you like to see my thoughts on the mistakes that entrepreneurs make, please visit my lens at http://www.squidoo.com/donteatthesteak
Thanks for the post Dane.
kcdc627 on May 11th, 2007 at 6:05 am
Dane makes some very valid points. Very nice.
drumrock on May 12th, 2007 at 7:10 am
Great article, thank you for collection all the good ideas about avoiding extra expenses! I’ve translated this article into Russian:
http://drumrock.livejournal.com/136737.html
- so the Russian-speaking community could also read your ideas.
Jim Coen on May 14th, 2007 at 4:30 am
These rules apply only if you are not sure if your idea makes commercial sense.
If your idea proves it makes commercial sense and has abilities to grow and prosper then its time to do what you have to do to succeed and protect your investment.
Joey on May 15th, 2007 at 9:34 pm
Wow people….Reading through this I’m amazed with how people critique Dane’s advice blog. Someone like me who was surfing the web desperatly trying to come up with a business idea. I thought of something that I feel can really work. After writing down some kind of “plan” i came across this site. Dane’s advice made me realize that the number one thing is get a customer that wants to give me money…Once I get that I will deal with all the legalities. Simple advice being passed along. Much appreciated. I just don’t understand how some people can be so negative and actually curse at someone who is actually kind of doing something positive. Obviously when discussing things not everyone is going to see eye to eye on anything…Imagine we lived in a world that everyone saw eye to eye??? Think about it…My advice to everyone in here is…Add some positive advice here to people, instead of just knocking someone that’s actually doing a good thing. Thanks again Dane…
Acácio Monteiro on May 17th, 2007 at 8:06 am
I agree with Dane.Start a business is like to be in the midle of a desert or a ciment Jungle that´s what is our cities. First of all you have to survive and you have only the capacities of doing by yourself. If you do not have preparation and training is better to avoid this. Competition with any enviroments needs preparition, training ,knowledge and own capacities like a guerilla fighter. The idea of MR. Dane is starts by yourselves brick by brick, stone by stone giving to your futur business a good foundation.Everybody in live wants the best spending the minimum. That´s MR.Dane formula and do not take allien risks.
banker on May 21st, 2007 at 10:34 pm
If you follow this advice don’t worry about getting a bank loan. In all likelihood no bank would ever touch such a disorganized mess of a business. The don’t get separate bank account was a piece of advice that really had me puzzled. Why? There is such thing as a free account. Also, if your business is unable to absorb roughly CAD$125/ year for a fixed rate account there may be reason to doubt your business’s viability. As soon as money is flowing in any direction separating business from personal funds will save who ever is doing your accounting many hours of work. Even if this person is yourself, time is money.
Alphonse Tan on May 25th, 2007 at 7:50 am
1. Don’t quit your day job.
* This is so you won’t reach a point wherein you have nothing at all, not even money for gum..
2. Don’t incorporate. Seventy five percent of all businesses are sole proprietorships, and they already make money.
* true
3. Don’t get a bank account. Your personal banking account will work just fine if someone wants to write you a check, or if you need to pay for something.
* Mixing business money with personal money isn’t good for everyone. Not everyone is a financial guru..
4. Don’t rent an office. Work from home. It won’t require a first, last and security deposit. Plus, it’s tax deductible.
* just like me… I run an advertising agency at home… works for me…
5. Don’t hire an attorney. What’s an attorney going to tell that you didn’t already know, or couldn’t figure out on Nolo or in a good bookstore? There are only two times to call an attorney: if you’re in jail, or if someone else’s attorney contacts you.
* Why would you need an attorney? do you plan to rob people of their money? if not, then you don’t need one.
6. Don’t hire an accountant. Quickbooks Simple Start will get you going.
*Accounting is different for different types of businesses… if you’re a commission agent, it’s just about commissions.
7. Don’t get a loan. To get a loan from anyone, even your family, will require that you do too many items on this list. And besides, if you get a loan, you know work for the bank — not for yourself.
* true
8. Don’t hire anyone. Don’t hire someone if you can do it yourself. For everything else, use contractors and give them 1099.
* i am the ad agency’s graphic artist, web developer, computer technician, building admin, hr, and manager. + amen +
9. Don’t get a business license. I’m not advocating that anyone cheat the government. Once you can sell your product/service, go out immediately and get all of the necessary business licenses and permits in your jurisdiction.
* if you’re just a commission agent, i do not see the need to…
10. Don’t try to patent anything. It takes 1.5 to 2.5 years to get a patent. Who knows what the market will look like then.
* why patent? someone will copy them anyway..
11. Don’t design a logo. You are your own brand, you don’t need a logo.
* depends on your business…
12. Don’t waste time picking a business name. As a sole proprietor, you already have a business name: your own!
*true, but in some places, company names do a lot of magic when it comes to putting your left foot inside the door..
13. Don’t advertise. Advertising costs money, and takes time to perfect. Selling takes only you.
* again, depends on your product or service.
14. Don’t buy office supplies. If you need a pencil, get one out of the kitchen or your son’s backpack. You are working from home, aren’t you?
* :)
15. Don’t buy any equipment. Outsource everything. Fedex Kinkos can handle all of your printing, and instead of splurging on a postal meter head down the post office. Need something big? Rent it! If it’s not something you can rent by the day, maybe there’s another local business with one. Can you rent it during their off hours in the middle of the night?
* outsource!
16. Don’t try to find a partner. What do you need a parter for? Capital? Don’t take loans. Need someone with some sales experience? If you the inventor of your product/service can’t sell it — no one will be able to.
* partners may come in handy in times of desperation… they can whispher in your ear and tell you to go on… they’re right beside you..
17. Don’t join the Chamber of Commerce. Chambers of Commerce have great mixers where you can meet and network with other local business people. Right now, you don’t need to network, you need to sell! Plus, you can always go as a visitor.
* Sometimes, it helps, if you’re willing to shell out for membership fees…
18. Don’t tell all of your friends about the business that you’re going to start someday soon. Every minute that you spend telling someone you love about your future business is one less minute you have to either try to find someone to buy your product/service or to refine it. Plus, everyone knows an “entrepreneur� that is all talk and no action: don’t be one yourself.
* true…
19. Don’t write a business plan. Sure you need to know what you’re going to do and how you’re going to make money, but don’t waste time formatting it into a structured plan.
* jotting down notes might make it… actually all you need to do is know what to do, where to do it and how to do it…
20. Don’t get a business telephone number or mailing address. You have a cellphone, use it. If someone needs to mail you something, have them send it to your house. You’re working there, remember.
* hmmm… it is always better to have a business phone… whether or not it is in your kitchen or office… cellphone calls may cost more… i love email…
sorry dane… :P
Kathy