Daniel Offer is the Managing Director of Athena IT Limited, his company owns and operates the Facebook software application “Chit Chat for Facebook.”
Great – so you’ve got that amazing business idea. “I’m going to make millions with it,” you say to yourself! Now what? Now, you need to come back down to earth and decide how you’re going to put that plan into action.
As a forewarning, one of the most unfortunate home truths is that most of the value of an idea – and indeed a firm, isn’t necessarily in the idea itself but in how the idea has been implemented.
Wait! Stop! Don’t ask your best friend, Mum, Dad , brother, sister and your pet cat “Kitty” to be part of your firm. When starting out you should retain as much equity as you possibly can, equity represents your ownership stake in your business.
Equity can be traded for goods, services or cash. However, when you first start, your business prospect is at its riskiest and at its lowest value.
In order to get things done, you may wish to consider engaging in some form of partnership in order to acquire the skills and acumen that you need. However, I would strongly urge against this, and I would strongly suggest that you employ people or contract via outsourcing if possible – in any partnership there is always someone who brings more to the table in terms of effort and output than someone else.
Unequal partnerships can create discord. If you don’t have any money, then a partnership may be your solution – it’s also a great way to bounce ideas off someone and helps to ensure that you don’t make silly mistakes. However, as discussed above, it’s not without faults.
However, if you wish to engage in a partnership I strongly recommend creating a Partnership Agreement that contains:
You will also need to consider what type of firm you want or need to be, I would strongly suggest that you minimize the amount of paperwork that you need to deal with and start off as a Sole Proprietor if possible, however, you will have unlimited liability – so it may be desirable to incorporate as soon as you start to see results. When you start taking cash, you will also need to consider which form of setup is most tax efficient.
It’s really important to stay on the right side of the law, and the taxman, when starting a business. Depending on your country, there will be different laws and tax requirements. In the United Kingdom for example, you need to inform the tax man within three months that you’ve started a business or you’ll end up with fines.
Moreover, you’ll need to fill in a tax form at the end of the accounting year – it’s often little practical things like this that you haven’t been taught in the classroom that you need to consider when starting a business.
Ignorance, unfortunately, isn’t a defense in the eyes of the law – or tax man, so you’ll need to do your homework. Having a basic knowledge is often good enough when starting out.
It’s worth reading up on the tax information from your government and taking a basic law course before you start.
As previously discussed – in order to get things done, you need to do it yourself, get someone else do it for free (but they’ll want something in return – equity) or get someone else to do it for money (outsource or employ).
In order to start a business in a given field, you don’t necessarily need to be an expert – or even to have any knowledge in that particular area. One of the richest men of the 20th century was an American Steel manufacturer – yet he hadn’t a clue how to make steel. He employed people for that. Similarly, you won’t find Stellios, the founder of easyJet, flying a plane. However, in order to start your idea – you do need to get things done.
If you don’t have the money, consider acquiring the money – through bank loans, friends or family, or working for the money and then starting. Alternatively, consider partnerships – if you have the skill and they have the money.
You’ll need to be realistic here, no one is going to lend you £1m to start a business when you have no practical experience. Ensure that you start a business where your likely payback time is fairly quick and doesn’t require that much capital investment when first starting out.
In summary, you’ll either have the time & expertise or money – if you have a high paying job, it may be worth outsourcing. If you live in a Western Country, you may find that getting any job is more efficient than doing the work yourself or outsourcing via vWorker or to a country where wages are lower.
Depending on your type of business, there may be a little or a lot of competition.
If you’re starting out in an entirely new area you’ll find that, whilst there is no competition, you need to educate your market as to what it is your offering. This isn’t an easy feat.
Moreover, whilst in theory you have a “first move advantage” it means much more in theory than in practice – as you’re essentially testing the market place, educating the consumer and finding the market – all aspects someone with more cash than you can copy.
Don’t be too afraid of competition, it indicates that there is a market. However, you need to understand whom your competition is and how you can stand out.