Monday, May 29, 2006

10 tips for startup entrepreneurs

1. If you have to, be willing to lower your standard of living for a while - take fewer (or no) vacations and cut back on nonessentials like eating out - while trying to get your business off the ground.
It often comes as a shock to former corporate employees just how much it really costs to fund their own health insurance and pony up 100% of their own payroll taxes, among myriad other expenses. Better not book any Caribbean cruises for a while.

2. Be prepared to do a lot of everything, from answering the phones to changing the light bulbs, before you start hiring people to handle these details.
Once you've left the corporate womb, it's all up to you. There's no one to call when the plumbing backs up or your computer system crashes. If you're an energetic jack-of-all-trades type, terrific - but line up a reliable local techie who makes house calls, just in case.

3. Is the main reason you want to start your own company your unhapiness in your current job? Check that.
"Not everyone is cut out to run a business," notes Terri Lonier, a longtime entrepreneur and counselor to the self-employed whose web site,, offers a free monthly e-newsletter for business owners. "You really have to be ruthless in assessing your strengths and weaknesses. If you yearn to go out on your own mostly because you're unhappy in your current position, you'd probably be better off looking for another job instead."

4. You have enough savings stockpiled that you could pay your bills for three full years, even if your business doesn't show any profit during that time.
This one speaks for itself: Most businesses take three years to break even (if they last that long), so you need to have plenty of cash on hand. Of course, it is possible to finance a start-up by taking out a second or third mortgage and maxing out the credit cards, but... wouldn't you rather be able to sleep at night?

5. Successful entrepreneurs have to be good salespeople.
If you think "sell" is a four-letter word, you're in trouble already. Many experts say the most-overlooked cause of new-business failure is that fledgling entrepreneurs are reluctant to get out there and sell what they've got - especially if they come from a structured corporate environment where sales was always someone else's job.

6. You must have a tendency to bounce back quickly when things don't go as smoothly as you expected.
To hear successful business-owners tell it, getting a new company up and running is usually a matter of three steps forward, two steps back. If you have trouble dealing with unpleasant surprises, your first year or two as an entrepreneur may send you running back to the corporate fold.

7. Business owners don't need to do as much networking as corporate employees do.
Skill at schmoozing is valuable in any job, but for small-business owners it can spell the difference between thriving and starving. In most corporate jobs, a wealth of connections - with customers, potential employees, vendors, suppliers, and financial backers - is already in place when you walk in the door. To run your own show effectively, you have to spin that complex web of relationships yourself.

8. Starting a business is your own decision, but you have to discuss it in great detail with spouse or family.

Over and over again, entrepreneurs and the folks who advise them say that opposition from a spouse or life partner, or from kids who resent the fact that you're never home anymore, can strain a new business to the breaking point. Linda McCormack quit her job as a Bankers Trust loan officer 10 years ago to start a web-design firm called Pixellence, in Sea Cliff, N.Y. But first, she got her husband's full support. "Starting a business is stressful enough," she says. "If you had to come home every day to someone who said, 'Why are you doing this?' it would be just impossible."

9. It's a good idea to hire an accountant with a lot of experience in handling the special tax issues that small businesses face.
Entrepreneurs have to deal with a complicated barrage of IRS strictures and requirements, and trying to figure them out on your own can lead to some pretty expensive mistakes. Get references from current business owners - your dentist, your dry cleaner or someone else you trust - and hire an accountant who can guide you through everything from writing off office equipment to the correct tax treatment of bad debts.

10. Start-ups in general are risky, but don’t assume your business plan is so brilliant that you think you can be wealthy within a few years.
Tom Culley, a former McKinsey consultant who has been involved in dozens of start-ups in Brazil and the U.S., has seen countless would-be tycoons give up in frustration when they don't achieve instant riches. "Ninety-nine times out of 100, it takes many years of grueling, gritty, sweaty work to create a profitable company," says Culley, who's written a wonderfully clear-eyed book, Beating the Odds in Small Business (Fireside, $24.95). "My rule is, survival first, then success - however long it takes." He adds: "Slow ain't sexy, but it sure beats falling on your face."


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