How to Start a Business in a Recession
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 or IAC-EZ 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.
This was originally published as 20 Things Not to Do Before Starting A Business.
April Perry on March 28th, 2009 12:34 am
This is a great article, Dane! We did get a logo and a business name for our HusbandHero website, but otherwise, we kept it totally simple like you recommended. It takes the pressure off and allows us to just enjoy being entrepreneurs. We know that when we work hard, we reap the rewards, and we don’t have tons of costs to keep up with. Thanks for keeping up this blog!
Scott Quitter on March 28th, 2009 9:03 am
I really think the overall message here is important: Just DO it!!
Forget about the fluff and stuff. Spend your time wisely doing whatever it is that would have the greatest impact on your business! When you just getting started, or trying to start getting started, these are the rules.
I would add:
Look at your “To Do” list and whatever you want to do last will likely be the thing you should do first.
Darshan Kulkarni on March 28th, 2009 11:09 am
Dane,
I am starting a new business and thought that your article would be just the right kick in the butt for me to focus on the right ideas. While I agree that setting up a corporate identity, branding, equipment and even hiring people is something that can be held off, there are certain elements that are absolutely essential and not doing them is downright dangerous.
Specifically, the one that stood out like a sore thumb is the one that recommends that a person does not need to should not incorporate. There is a very significant reason for incorporating and that is for limited liability. Otherwise, any mistake made can come back to you haunt you multi fold.
The article is much better titled, things you dont have to do now. But titling it “things you dont have to do today.”
Overall, its a great article and one that makes a lot of sense, but I think the title is the part that really threw me for a look.
Just some constructive criticism.
Elizabeth on March 28th, 2009 11:37 am
I liked your points. I take issue with the “no business telephone” one, though. Granted, I didn’t start my business in a recession — it was boom times — but I would go crazy trying to use my cell phone as my business phone. It’s much harder to hold and if I go the headset route, people can tell. No, I kind of insist on the business line.
Other than that, I follow almost all your other points!
Scott Quitter on March 28th, 2009 11:43 am
Darshan,
I think what you’re saying makes sense but I also think it depends a lot on what kind of business you’re starting.
For example, if you’re starting a greeting card business and you’re working out of your home, I really don’t think you’re going to have liability issues in the early stages of establishing this kind of business…and maybe never, depending on how you’re business grows.
On the other hand, if you’re doing consulting where the advice you give to people could result in a negative effect, you could end up with liability issues in which case you may want added protection.
But I guess even in that case, I’m sure a lot of the potential liability issues can be avoided by constructing a sound contract before you give advice.
I guess the bottom line is, be smart about it and make sure you’re adequately protected, according to what’s appropriate for your circumstances.
I think you were wise to bring up this issue and the people who read this post would be wise to consider all aspects.
Regards,
Scott
PS Isn’t “Darshan” also a word meaning something like “gaze of the master”? Cool name, either way.
GoEverywhere Team on March 28th, 2009 2:00 pm
I think it absolutely does depend on what kind of business you are starting as to whether or not many of the things on this list apply.
If you are starting a real estate investing business, many of these things may not apply. If you are starting a debt collection company, MOST of these things do not apply.
I have to assume that this list really is targeted at the small-small business model working out of their home without high-priced “units” involved.
Overall, a solid list for the “do-it-yourselfer” out there.
John Tedder on March 28th, 2009 4:17 pm
I broke all 20 rules when I bought a tavern in 2005. I am starting a flea market in my 4 acre yard this year and I am keeping it simple. I am going to make sure I am making money before I do anything else.
Lee on March 28th, 2009 6:06 pm
I enjoyed your list. People spend too much time getting everything just right in the beginning and end up with nothing but an empty bank account. Your point about having the money to carry you while you rework your brainchild is valid as well.
Business Guy on March 29th, 2009 12:55 am
Excellent talking points and list, especially no 18. I quit talking about business opportunities and just let the work speak for itself, the proofs in the pudding as they say. Besides, jumping right in is an inexpensive way to learn if you want to do the business when and if it takes off.
RoomGator Team on March 29th, 2009 10:10 am
Fresh article and attitude, I like it. Some of the points are a bit provocative, like not having a business cellphone which costs maybe 20€ these days and is one of the most important tools. However, I get your message. Selling and doing business has to be number one priority before and after business launch.
Stephanie Valentine on March 29th, 2009 2:29 pm
Dane…a very cool list of don’ts. Time and money savings using a cool head and good logic. Thanks for highlighting all the places where small business owners waste important resources. You think good thoughts.
Melissa on March 30th, 2009 4:34 pm
Starting off on the right foot is always very important. So many practice and small business owners struggle with either getting started, or staying a float. Being an entrepreneur and business owner can be done, but with the right tools and training. I personally have used many resources to help my business. One in particular, “The Ultimate Practice Building Book,” by David Zahaluk, helped me to clarify and differentiate my practice from a marketing standpoint. It’s amazing!
Matthew Arrow on April 1st, 2009 12:53 pm
Is this April Fools?
I understand your overall message; to focus 100% of your time on turning a profit as soon as possible, and I agree with that. However, 18 of your 20 recommendations I would highly advise against.
If you are starting a business as a hobby, not to financially support you and your family, this is a good read. But if you are trying to make a living every point, except 1 and 7, is almost essential.
Jenny Linado on April 7th, 2009 7:00 pm
This is probably the worst advice I have ever read on starting a business.
Scott Quitter on April 7th, 2009 8:03 pm
In my view, these are not LAWS but rather suggestions. It’s important for each person to weigh them out carefully and only apply the ones that best meet his/her needs and circumstances.
I’m guessing that nobody will blindly follow them all.
TO: Jenny Linado, I’m honestly curious what advice or suggestions you would offer. Would you mind sharing?
Regards,
Scott
Kapil on April 9th, 2009 6:11 am
Hi,
Nice to see your tips!
I would like to know if I am entering into FMCG industry with Liquid product more specifically a ready mix liquid, where consumer needs to add 20% of the Liquid and 80% of the water to use the product. I am comfortable with lots of your points, however let me know how I can avoid Packaging of the product where it is an important aspect? How I should go about it kindly let me know your feedback.
Thanks
Jamelle The Starting a Business in Philippines on April 15th, 2009 2:00 am
Being smart and creative is important now that there is a recession. To survive in times like this remember to look for new strategies and learn from it. It’s also a great help to others if you can share some other ideas about making business. Nice article! very effective nowadays.
moussette on May 27th, 2009 12:57 pm
Interesting tips, but if you’re female, it might pay to register a d/b/a with your local county clerk . in most rural areas, its only like $25.00, but in large cities it may cost over 100 bucks. there are creepy people who target women for bullying/cyberbullying. and a company name might not be indicative of what gender the owner is. Also if your buying products wholesale, do you really wanna be giving out your SSN to wholesalers in this day + age? Having a resale number connected with your business is a better idea. True, you have to fill out tax forms quarterly to the finance dept of your state, but its better than giving out your personal SSN.
mashengky on June 3rd, 2009 6:20 am
well I have my own website and i sell a product in my website as a reseller. i still need money though to start my website, as you know i need a domain name, a website script and a one year hosting.
my website is based on affiliate marketing, so i spent almost zero dollar for my advertising.
but, i never forget to make it louder and reputable by building my own blog and follow the twitter..
i might say, finding a partner of business is important, surely i will choose my partners based on financial and skills.
Mick Dickinson on June 4th, 2009 1:55 am
In the UK, a recent survey from Lloyds TSB revealed that more than a quarter of small-business owners felt the recession had no impact on their business planning, while a third admitted they didn’t have a plan at all.
Basically, you’ve got to have a marketing plan.
Jackie on June 5th, 2009 7:56 pm
Thanks for the posting, great advice, would like to share this franchise opportunity which I came across -
http://www.bizymoms.com/franchises/opportunities/gourmet-dessert-shops.html
should be a great business opportunity as they have over 23 years experience in franchising, offers support without all the usual franchise fees.
Susan on June 6th, 2009 7:40 pm
Thanks for the great info. I have a few businesses that I do. People preached, “business plan…business plan.” I find that jotting ideas, costs, resources, etc. in a notebook works since modifications are necessary. I also make copies of possible resources and put the pages into binders. Advertising is expensive. I am considering buying a car magnet, t-shirts, and pens. I find that the cheapest way to advertise is the old fashioned way of pounding the pavements and networking everywhere I go. http://www.aqualytebizhealth.blogspot.com
Mark Hook on June 8th, 2009 7:45 am
I agree with the above, a marketing plan is essential, but a lot of small business find it difficult working out where to start.
Here’s a good article on how to prepare a marketing plan – http://bit.ly/CIYeH
Hope it proves useful.
Jack on June 8th, 2009 8:21 am
Big Think currently has available a great feature on Navigating Today’s Economy: An expert guide to the new paths of opportunity. Among many others you can see the Dean of the NYU Stern School of Business, Thomas Cooley speak on how entrepreneurs approach the new economic realities: http://bigthink.com/topics/leadership/ideas/thomas-cooley-on-finding-success-in-a-downturn
Kennemore Photography on June 9th, 2009 8:58 am
I agree with Jenny Linado…worst article for small businesses I’ve ever read!
J. Camp on June 13th, 2009 12:58 am
For the article – I disagree with a lot of it, but yeah – K.I.S.S. is a great rule. Almost all of these “don’ts” turn to “dos” after you start making a little money and you don’t really illustrate that. You seem like a sharp guy and have done things right by continually adding good content, monetizing your blog, managing your mailing list, etc. You have great traffic and I’m sure you keep food on the table.
What would it take for you to email me about partnering with our development company or posting an article? I’ll give you more info after I hear from you. We did over $3million last year.
john on June 20th, 2009 4:41 pm
Hmm… I agree. Some of what you say is definately true. Simple and cheap are two important concepts for a start up. However, a proper business structure and seperate business account are two things that can help protect your personal assets. In either case, here’s another great article on how to start a business on a shoestring budget and still get what you need.
http://sbimonline.com/content/business-cost-savings-spending-wisely-a-critical-start-success-factor
Reseller hosting on July 1st, 2009 3:19 am
found your site on del.icio.us today and really liked it.. i bookmarked it and will be back to check it out some more later ..
Hoster on July 8th, 2009 8:05 pm
thanks !! very helpful post!
Hosting on July 9th, 2009 3:47 am
You made some good points there. I did a search on the topic and found most people will agree with your blog.
Leave a Reply