Way to Grow

What Type of Entrepreneur Will You Be?

Matt Blumberg says there are two types of entrepreneurs -- those who start businesses and those who run businesses. Rarely are they both the same person.

(Tip of the hat to Ken Dyck.)

The Value of an Advisory Board

Joel Welsh of StartUp Nation says that "One of the key actions that always pays skyrocketing dividends is the creation of & regular communication with an advisory board." He indicates that he didn't do it when he started his first business because he wanted to do it alone.

I didn't do it when I started my business either, because I thought my consulting practice was too small to warrant the attention of an advisory board. Sure, I got advice here and there, but much of it was second or third hand, and sometimes it was belated.

You don't need to learn from your own hindsight if you'll listen to the hindsight of others who have been down the road and know where the potholes are. The basic advisors are a banker, an accountant, a lawyer and an insurance agent. I recommend that if you don't have prior experience in sales and marketing that you find an advisor who knows your industry and market. Wherever your weak points are, there's where an advisor can help.

So you might be wondering, how does an advisory board work?  It sounds like these are just vendors of services that you hire. Well, in most cases, yes, and you will compensate them accordingly. But you are hiring them specifically for advice, not just to write a contract or do a tax return. You should probably specify a time limit for their services so they don't begin to feel burdened regarding your business.

Entrepreneur magazine offered tips on selecting an advisory board in an earlier article by Asheesh Advani.

Ad advisory board can make you more productive by avoiding missteps and costly mistakes. As Joel Welsh puts it, an advisory board "will make you smart".

Two Heads Can Be Better than One

AllBusiness.com discusses the benefits (and caveats) of taking on a partner when you buy a business in "Should You Take on a Partner When Buying a Business?". They don't mean partner in the legal sense. They mean someone with whom you go into business. 

Benefits: "...not only may two heads be better than one, but two bank accounts can be, too.", and "Owners can run ideas by each other, cover for one another, and allow for the other to take a much-needed vacation."

Caveats: "Be sure to draft a partnership before you purchase the business. Your partnership agreement should explain clearly how either partner can leave the business should they need to, what will happen if one partner dies or becomes disabled, and how disagreements regarding the business will be settled.", and "Only partners who are aware of their own strengths and weaknesses can effectively divide up the work and take on the tasks that suit them best."

Considering Debt as Capital

Thanks to Brad Feld for directing us to Chris Wand's article on the eVenturing site. Chris defines the difference between using debt vs. equity to finance a business, and he helps us understand considerations around using debt. The article covers:

• Know the difference between debt and equity
• Thoroughly understand the issue you’re looking to resolve with a debt facility
• Be honest with yourself about your company’s finances and financial abilities
• Keep in mind that taking on debt requires establishing and then maintaining a relationship
• Ensure that your company’s infrastructure can support the debt facility
• Know your new credit partner well

What's in a Business Name

Scott Allen in About Entrepreneurs discusses business names in his first "Saturday Startup Tip" (found via Frank Ross in AllBusiness.com). Allen provides a straight-forward discussion of Fictitious Business Names, Trade Names and DBAs in Startup Tip #1.

[Note: Scott Allen has started offering tips on a different subject each day of the week. Saturdays are Startup days.]

Best Startup Corporate Structure? It Depends

I've seen a lot of questions, answers and discussions about the best organization structure for a new business, but none as clearly and cleanly stated as a post from Brad Feld.  The answer really depends on number of owners and your start-up financing strategy.  Read it in full.

Thanks to Anthony Cerminaro, a business attorney blogger, for the tip.

When to File a Patent

You have a great idea, one you think is unique, and the first thing you want to do is get a patent, right?  Slow down, says a Business Week article.  Find out first if your idea is feasible. Two good reasons to do this very early:

1) "Taking action on an idea that isn't fully developed is a sure way to botch the application or get patent protection that's too narrow in scope to be of much value.", says Bob Lougher of the United Inventor's Association.

2) "Protection isn't really the most important thing.", says Richard Stim, an attorney and author of intellectual property books. "What's most important is to find out if an idea is commercially viable, since there are plenty of ideas that are patentable and yet pretty darn unmarketable."

The article recommends you should, in this order:

• Document the idea and establish its date of conception
• Invest in a market feasibility study
• Do your own preliminary patent search
• If you still have an opportunity, go ahead and file the provisional patent application.

Startup Secrets of the Successful

A post by Dane Carlson led me to a whole series in BusinessWeek on "second acts" -- people whose corporate careers are just the lead-up to entrepreneurship.  Dane featured the Act II concept, itself.  But one of the collection of related articles caught my eye -- Startup Secrets of the Successful.  Aha!  At last someone is telling us all just what it takes!  Well, the secrets aren't really so surprising, but they are definitely worth heeding if you're just starting your first business:

1. Experience counts
2. Fund the dream yourself
3. Oodles of patience
4. New challenges [You'll have to learn to do things you didn't anticipate]
5. Get a lawyer and an accountant
6. Network, network, network
7. Diversify
8. Build it and they might not come
9. Wear many hats
10. Get innovative

Read the article in full.

When to Pull the Trigger

Not all start-up mistakes are related to jumping into a new business without adequate planning. (OK, I'm mixing metaphors -- jumping /pulling.)  Jeff Cornwall talks today about the opposite case, where a new entrepreneur has trouble deciding that the plan is ready to execute. Cornwall often advises entrepreneurs that it's OK to move forward with a plan that is just 80 to 90% ready.  Why?

• "Your business will most likely not look anything like your plan within six to twelve months. Your plan is a living document, not a blueprint that prescribes every step in detail for the entire life of your new venture. You will learn with each step along the way and that learning should inform and shape your planning as you go.
• You are most likely entering a dynamic market. That is usually what creates the opportunity you are pursuing in the first place. Be ready for what Peter Vaill call the permanent whitewater that you are about to enter. The assumptions you make today in your plan will likely look very different in a few months as your market evolves.
• You can never eliminate all risk and uncertainty, no matter how long you plan. That is part of the game. There will be surprises around every turn. Your success will be determined in how flexible and nimble you are in adjusting to all of these surprises. You cannot plan it all away no matter how hard you try. Entrepreneurship will always have some risk. Plan for as much as you can, and then forge ahead."

There's always plenty to learn as you go along, no matter how thoughtfully you plan.  Stuff happens. Keep your eyes open and your balance up when you hit that "whitewater" Cornwall talks about.

The Truth About Starting and Growing Your Business

I'm probably the last kid on the blogospher to have read Barry Moltz's book, You Need to Be a Little Crazy. His subtitle is The Truth About Starting and Growing Your Business, and the book is as advertised. It is a surprisingly personal book. Moltz spends many of his chapters on what I have to call "relationship" issues,  For example (out of a 9 chapter book):

• The effects on your family of starting a business (How Does Family Fit In - Ch. 3)
• Growing your organization (Finding the Lunatics Like You - Ch. 4)
• The difficulties of partnerships (Having a Partner - Ch. 5)
• The importance of alliances (Networking Is Not a Verb - Ch. 6)
• The business development challenge (Finding Customers - Ch. 8)

I found this book very refreshing. Most books about start-ups are busy being very professional (how-to books or how-I-did-it stories) and never treat the human issues addressed in this book. Notably, Moltz, in Chapter 2, warns us to beware of overstepping ethical lines in the pursuit of your dream. This is a highly unusual book for its openness and candor.

Note: This book is mainly only for budding entrepreneurs.  If you've already been down the road you'll probably find it entertaining, but it won't tell you anything new.  But if you're just starting out, absolutely read this book for a good dose of what it is really, really like.