Vishal P. Rao
Joined: 23 Jun 2005
Posts: 957
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# Posted: 23 Jul 2008 01:13 · Edited by: Vishal P. Rao
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There's an interesting post at the business-opportunities.biz blog that I just stumbled across. More than the posts, I found the comments more interesting. Would like to know what you people think of it.
In addition to not quitting your day job, here's my list of twenty things not to do before starting a business:
1. Don't quit your day job.
2. Don't incorporate. Seventy five percent of all businesses are sole proprietorships, and they already make money.
3. Don't get a bank account. Your personal banking account will work just fine if someone wants to write you a check, or if you need to pay for something.
4. Don't rent an office. Work from home. It won't require a first, last and security deposit. Plus, it's tax deductible.
5. Don't hire an attorney. What's an attorney going to tell that you didn't already know, or couldn't figure out on Nolo or in a good bookstore? There are only two times to call an attorney: if you're in jail, or if someone else's attorney contacts you.
20 Things Not to Do Before Starting A Business
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Newbie Shield
Joined: 22 Sep 2007
Posts: 1533
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# Posted: 23 Jul 2008 08:11 · Edited by: Newbie Shield
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Hi Vishal,
I'm glad you've raised these issues. Warning, some of the advice on the original article was either posted to create controversy or because the author is mistaken. I do agree with some of it and it's definitely a good topic.
1. Don't quit your day job.
Don't quit your day job until your online income supports your life style. Furthermore, you should first see that your income will continue to grow and the business model is sustainable.
Too often I see folks who have just quit their day job or plan to quit their day job after they learn a small handful of tidbits about making money online. Unfortunately, they develop a false sense of security and end up in financial trouble when their biz doesn't take off.
They get guru buzz and lose sight of common sense and wisdom. They confuse desire and desperation with feasibility. Don't quit your day job prematurely.
2. Don't incorporate.
Don't assume that incorporating is the best choice, especially from the start. It can be a good choice if there are good reasons. Incorporating is expensive for a person that is new to business, it requires a lot of study, there are tax consequences, and it requires more day-to-day work.
If you are just starting out with a one person biz and don't have any income or income is minimal, consider either doing business in your own name, or if you have enough expenses, consider establishing a sole proprietorship for write-off purposes and a small boost in branding.
If you need liability protection and wish to have more than one person involved in your biz from the start, consider a managed multiple member LLC.
Understand that you can always upgrade your business entity at a later date.
3. Don't get a bank account.
What would be the alternative to not getting a personal bank account? Well, I suppose you could get a similar set up such as PayPal. Not sure why a person would recommend against getting a bank account.
As far as a business bank account is concerned: Unless you are doing business in your own name, you'll have to get a business account. It's required by law for tax purposes.
4. Don't rent an office.
Offices can be very expensive, especially for a single person start up with minimal funds.
If you need a brick and mortar because your business requires face-to-face interaction, then you'll have to get one.
5. Don't hire an attorney.
In most cases this is true. If you are going to set up an LLC or a corporation, I suggest that you hire an attorney - at least for consulting purposes. They can also correctly file some or all of your paperwork.
Hire one if you can think of specific reasons for needing their services.
If your business grows big enough, it's a good idea to at least chat with a business lawyer or two. You'll want to protect your sustainability, properly expand operations, and integrate legal protection into your business framework.
Get an accountant for accounting purposes, but know that business entity issues are best left up to business lawyers. Accounting is a subset of business.
Folks often make the mistake of assuming that an accountant can consult on just about everything. I've seen the limitations of my own accountant in the past and have had to consult with business attorneys as well as tax attorneys on certain issues.
6. Don't hire an accountant.
If you are doing business in your own name, you don't need to pay extra for accounting services at first. As your business grows, you'll want an accountant for tracking, organization, write-offs, etc.
7. Don't get a loan.
Loans are risky. If you take out a loan and your biz doesn't become profitable, you'll have to pay back the loan with interest. You could end up defaulting and harming your credit.
Only get a loan if you are experienced and have done feasibility analysis (market research, etc).
The message is to think twice before you apply for a loan.
8. Don't hire anyone.
Don't hire anyone until you need to do so.
Wait until it's financially feasible. You may need to hire someone later on when you need to free up time for other duties or if you don't have the skills to wear a certain hat.
9. Don't get a business license.
Don't automatically spend money on a biz license until you've made your first few sales and expect sales volume to pick up. Make sure you have a license if and when required by law.
10. Don't try to patent anything.
Don't patent anything unless you've consulted with a patent lawyer. Don't automatically take his advice. Consider it and understand that patents are expensive.
11. Don't design a logo.
Do design a logo. Separate yourself from others. Do everything you can for branding.
12. Don't waste time picking a business name.
It's a matter of personal preference. Do business in your own name if that's the way you want to do it. This works especially well for a blog.
On the other hand, do spend time choosing a business name if that is your style. It's best to choose a name that actually describes your business.
13. Don't advertise.
While free advertising is very effective and is the option for a low budget, advertising is an investment rather than an expense. Once your budget allows, make sure that you spend money on advertising.
14. Don't buy office supplies.
Buy needed office supplies. Make the list before you shop so that you don't impulse buy.
15. Don't buy any equipment.
Same as number 14. Buy what you need but no more. As time passes, add to your inventory as needed. Allocate an equipment budget and be careful not to exceed it.
16. Don't try to find a partner.
Don't start your first venture with a partner. You need a good deal of experience before you tackle joint ventures.
17. Don't join the Chamber of Commerce.
It's a great place to perform research but it costs around $500 (depending on the state) to join. That is not a justifiable expense when first starting out. Consider it later in the game.
18. Don't tell all of your friends about the business that you're going to start someday soon.
Don't brag about future income expectations. You'll just look foolish. Wait until you are actually making the money.
19. Don't write a business plan.
Do write a business plan even if it's just a few pages. Planning is critical for success and sustainability. It also serves as a framework and grows with time.
20. Don't get a business telephone number or mailing address.
If you are doing business in your own name, you don't usually need a biz phone or biz mailing addy. You can if you like but the cost isn't usually justifiable. These two are usually optional when first starting out. You may need these later in the game.
It's okay to use these if you need them from the start.
~Newbie Shield~
Edited to include comments on issues 6-20.
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