SO YOU'RE SITTING IN YOUR CUBICLE, dreaming about starting your own business and being your own boss. Well, as any experienced entrepreneur will tell you, it's not easy--especially when it comes to learning the basics. There are dozens of loose ends to take care of in the early stages, from researching and writing your business plan to securing funding to insuring your company.
When it comes to your strategy, there will be some things you don't want do in haste only to regret later. Writing your business plan, for one. And you could end up being penny-wise and pound-foolish with some aspects of your business if you're not careful. So where should you take your time, and where can you save a bit of money without ruining your business before it even takes off?
A little bit of knowledge is key. "You can't be an expert at everything, but know as much as possible so you can connect the dots," says Heidi Krupp, 36-year-old founder and president of Krupp Kommunications Inc., a five-employee New York City publicity, marketing and consulting firm that she started with $5,000 of her own money.
Here's a rundown of a few business basics, with advice for connecting those dots better, faster or cheaper.
Do It Better
There are always things you can do better in starting a business, aspects of your company that you should put a little more time into to avoid problems down the line. Here are a few:
* Researching your business idea: Scan background research reports and market forecasts, but don't rely on them solely Go to meetings, forums, symposiums and trade shows, pound the pavement and, most important, listen. Think about your competition and the type of consumer who would want your product or service the most. "Talk to real customers. Make sure your product or service has value to them," says Tim Petersen, managing director of the Samuel Zell and Robert H. Lurie Institute for Entrepreneurial Studies at the University of Michigan at Ann Arbor. See www.entreworld.org/channel/syb.cfm and our site, www.bizstartups.com for a host of tips on doing your diligence.
* Writing your business plan: "Everyone teaches people to write a business plan to raise money," says Jerry Mitchell, founder and president of the Midwest Entrepreneur's Forum in Chicago. "That's wrong. Write a business plan for how you're going to stay in business for 90 days." Short business plans are all the rage right now. That means a four- or five-page summary accompanied by a 20-page (maximum) overview of your product and market segment. There are tons of pointers online to help you write a better business plan. See www.sba.gov/starting/indexbusplans.html and http://cobrands.smallbiz.fmdlaw.com/startup/plans/websites.html for great tips. You can also check out bplans.com, which offers a lot of helpful tips, and of course, don't miss www.entrepreneur.com/bizplan for a quick how-to.
* Setting up your accounting procedures: "People do things backward," says Philip Goldfarb, a partner with accounting firm Weisberg, Mole, Krantz & Goldfarb LLP in Long Island, New York. First, he says, hire an accountant who knows your industry and has time to dedicate to you. Second, decide on your entity type (partnership, corporation and so on), and have an attorney draw up your organization papers. Next, buy accounting software that fits your business model. The last step is putting your controls in place. Visit www.businesstown.com/accounting/basic. asp for some handy tips.
* Bootstrapping: You're sinking your own money into a new business without the help of outside investors. If you're lucky, your friends and family will advance you some cash, too. This is how the majority of U.S. businesses get started, but unfortunately, as every beginning entrepreneur knows, this seed capital is very limited. The trick is getting the most bang for your buck out of this bootstrapped cash. "You have to guard cash like it's king," Mitchell says. Of course, it's easier said than done. Luckily you can bootstrap better with a variety of creative methods that keep your overhead low and improve your cash flow. Try logging on to www.nciia.org/resources/entreguides/gettingstarted/money1.html and www.powerhomebiz.com/vol25/shoestring.htm for some nifty advice on making your valuable first dollars last longer.
* Creating a budget: The success of your business depends on how well you budget. "Once you have a feel for what your revenues are going to be and how much business you're going to do, from that you should be able to design a budget," Goldfarb says. Visit our Financial Analysis and Budgeting section (www.entrepreneur.com/money/budget) for information on better budgeting.
* Setting up your management team: You need proven rainmakers to get your company off the ground. But you want to make sure you're selecting the right people for your business and product. Entreworld.org has many tips in its "Start-Up Resources" section, and, don't forget to check out our article "Creating a Management Team" at www.entrepreneur.com/ Your_Business/YB_SegArticle/0,4621,284381-----,00.htm.
* Keeping customers: Who wants a bunch of one-time customers? Keeping customers is something that any business can do better. Pick up some great techniques and tips at www.businesstown.com/internet/marketing life.asp and www.wellsfargo.com/biz/ bustips/tip/mktgsalesresu1ts.html.
Do It Faster
Some aspects of your business can be done faster, provided you know the shortcuts. Here are some tips for wrapping up some of the business basics more quickly:
* Finding an attorney and an accountant: This is actually the first thing you should do as you're starting your company. To speed up the process, be targeted. "Get somebody with background and experience in your particular industry," Goldfarb says. "Find a firm under 50 people, but where the partners, managers and seniors have big-firm experience." This way, you'll get more attention and cheaper rates from a seasoned pro. Online references that can help you get a step closer to the right professional include www.nationalbar.org and www.smallbizaccountants.com.
* Locating outside financial resources: You can easily spend all your time looking for money rather than building your business. "Raising money is time-consuming," explains Joseph Bartlett, a partner with law firm Morrison & Foerster in New York City and co-author of Raising Capital for Dummies (Wiley). It can be challenging to get early-stage money these days, Bartlett says, and many beginning entrepreneurs rely on friends, family, loans and their own resources until they reach a certain size. But if you're bent on obtaining some outside funds, you have to know what you're looking for to make the process go faster. Angel investment is one option. Online resources such as www.moneyhunter.com will help get you up to speed. Contact your local chamber of commerce, business development groups, universities and entrepreneurial forums for help in locating outside investors in your area. Depending on your type of business, you may qualify for an SBA loan, too. See www.sba.gov/financing for more information. You can also pick up a copy of Ralph Alterowitz and John Zonderman's book, Financing Your New or Growing Business: How to Find and Raise Capital for Your Venture (Entrepreneur Press).
Today, it's important to look beyond the obvious when money-hunting. Have you considered staffing with your developing client and customer base? If you land a customer of some magnitude, you can try to get impending invoices financed early onto provide working capital, says Petersen. Another option is the convertible bridge loan, which converts debt into equity in the form of preferred stock as a company grows. "It's very tied-up equity money," says Tom Kinnear, executive director, also of the Samuel Zell and Robert H. Lurie Institute for Entrepreneurial Studies. This loan can give investors incentive to provide you with funding in your company's early years.
* Obtaining the required permits: Instead of spending hours in line, take a shortcut with www.sba.gov/hotlist/license.html, which provides links to the state agencies that handle licenses and permits. You'll get a good overview of what's required in your state.
* Finding a mentor: Get free business counseling with the SCORE program (www.score.org/counselors). It's associated with the SBA, which offers its own mentoring programs (www.sba.gov/classroom/biznientoring.html). Call successful businesspeople, ask who mentored them, then map your strategy. "You can shorten the [startup] process by a month or more," says Bob Wilson, director of the Center for Entrepreneurial Growth in Oak Ridge, Tennessee.
If you're really stuck, try this creative approach: "Take out a classified ad in the help wanted section saying 'Needed: a mentor for a young entrepreneur,'" Krupp says. "That would catch someone's attention."