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Monday, July 23, 2007

The Plan

Your Day Job
Before you "quit your day job", and I do want you to, you need to perform quite a bit of due diligence. As with any great structure, your company needs a solid foundation. This post will illustrate the main items that need to be on your checklist. Do you need a business plan? No. Do you need customers? Absolutely. I would recommend testing the market in your spare time to develop an alternate income stream prior to devoting all of your time to the fledgling company. Eventually, try to start multiple streams of income so that all of your "eggs aren't in one basket." Your goal should be NOT to be dependent on any one revenue source.

Business Plans
Business Plans are a great idea, and many lenders and VC require them, but they are often overwhelming at first. If you are using software that builds the business plan, it will ask you a series of questions that will all but depress you. Who are your board members and officers? What is the amount of your cash reserves? Keep in mind, you can become a company, and actual corporation, with very few assets or resources. However, the planning will help you understand the nature of your business in ways you may not have thought about; just don't be discouraged by the process.

It may seem like a no-brainer, but many people start a company with no existing customers. I call this the "if you build it, they will come" theory. Sometimes this actually works. The story of FedEx is a good example, where they had to build their entire infrastructure with not one customer on opening day. For FedEx, good research and knowing their potential market paid off. I would suggest that the average enterprise start off slowly and build customer momentum until the timing is right. Keep in mind that just because you think your business idea is great, your potential customers may not. Don't let pride and vanity get in the way of logic.

Vendors and Suppliers
Every business has vendors and suppliers, even if they have no customers initially. Have your fulfilment process in place before going live with the business. In the case of IT, it's a good idea to forge a VAR (Value Added Reseller) agreement with key software or hardware providers. I did this, and it proved to be a good side stream of income. It also adds instant credibility for you plus lead generation.

Advisory Board
A group of professionals and mentors that can give you candid, often blunt advice is crucial. It is best to solicit board members with whom you have professional relationships rather than personal ones. A friend is less likely to tell you that your ideas stink. :)

Company Identity
As you start penetrating your market, you will begin establishing your brand. A consistent look and feel is necessary for this, as well as to increase your customers' confidence. Pick a great logo (splurge on a graphics designer if necessary), develop a slogan or catch phrase, and use these items on everything you touch: letterhead, business cards, websites, email signatures, marketing materials, etc.

Bank Account and Lines of Credit
You must open a business bank account if you are incorporated in any form, or else you risk "piercing the corporate veil." More on this subject later. Next, your goal is to develop a rapport with a lender and borrow a small amount of money to establish initial company credit. You may have to secure the loan against an asset in the beginning; eventually, a signature and your books will suffice.

Corporate Credit Card
I find it helpful to carry a corporate credit card that can be paid off each month. This helps manage small expenses that come up, and gives insight into spending patterns.

Partners (in Success): Accountants, Attorneys, Mentors, Lead Sources
These people can also be part of your Advisory Board; they are the folks who want you to succeed because they have a vested interest in you. Spend a lot of time searching for and interviewing these people. Reward them for their time, and it will come back to you in truckloads.

Take my accountant, for example. I respect her and her time, even though she's flexible and understanding when situations throw us off balance. One year cash was short when her yearly bill came, and it took a couple of months for me to pay her. Without her asking, I included two month's interest on the bill at 18% per annum. The results of my good faith actions like this mean that I have a loyal accountant who will travel to meet me anywhere I'm working in my home base of Atlanta, and on my schedule. There is no price for that!

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