Recently a friend of mine decided to jump into the world of entrepreneurship after 20+ years "working for the man." Like a good manager, she had developed a full plan and punch list for starting his company. Some of the items that she included on the list as "first" were:
- Form legal entity, tax ID number and registration
-Build website, brochure and marketing materials
- Get business cards, phone lines, mailing address and email
- Create a marketing plan
- Establish a banking relationship
She asked me what I thought. I told her it was a great "second list" for starting a company, but it was not a very good "first list."
Here is my very short but highly important "first list" of things to do when starting a business.
1) Secure 3 clients - You are not a business until you have clients. I would submit that clients are what help you to more clearly define the right structure and messages in your "second list." With clients, you have real market feedback on what you deliver and what is valuable. You have initial revenues to support your efforts. All of the administrivia that was on the first list is important, but it can all be deferred until after you are a real business, and that means clients. Why three?
- 1 client and you are just contract labor: That's not a bad thing, but it isn't a business -- it's a job without benefits.
- 2 clients and you have 2 part-time jobs: At this point, it is very likely that you are trading time for money. This may be at a higher rate than as an employee, but you are footing all of the expenses, taxes and benefits. Time for money is similar to a job without the protection that an employment arrangement provides.
- 3 clients and you are a business: With three clients you have established a variety of working relationships, scopes of work, time frames and the necessary mechanisms to support all of that. Three clients forces upon you some disciplines and systems that form the base of your business platform as well as broader market understanding.
2) A system for handling your money - A right brain person I know whose business includes makeup, hairstyling, photography and model portfolio work started earning three times the amount she made as an employee, but was starting to fall behind on her bills. Why? She had no system for handling her money. She simply made a few small adjustments and she was back on the right track:
- She started a checking account with debit card that was fully transparent online to her. From her phone, (tells you her age bracket), she could handle all of her banking, bill paying and cash management online. Working with QuickBooks, she was able to automate over 90% of her transaction handling. Great for her, because this right-brainer would rather do anything then handle left-brain accounting activities.
- Signed up for "Square" smartphone credit card processing for handling her client's invoices and purchases. There are other smartphone credit card processing platforms, the point is that no longer was she handling invoicing or accounts receivable issues.
- She set aside 1 hour every 2 weeks to go through her finances with a trusted adviser, (her husband in this case), and just make certain that nothing was falling through the cracks.
Once you have these two figured out, you have the basis of a business. Focus first on the clients and the money; the systems will fill in logically to fit the needs of these two.