“How do you start a business?” I’m being asked this question more and more frequently, most recently just last night. Last night there was also a followup question that helped me realize why people ask me the question in the first place. “How many businesses have you started?” Off the top of my head I answered six but as I prepared to write this post I realized the number was actually nine or 10 depending upon how one counts. It’s not a huge number but the next question was the best one.
How many of your businesses have succeeded?
I responded with “That depends upon how define success.” Let’s start with the easy one. ColorMetrix has been an ongoing and profitable concern for almost 18 years. That’s not an accident and, at the very least, it’s a form of success. One of my other businesses was an ongoing consulting concern that had a darn nice run for 10 years starting in the mid-90s. As ColorMetrix grew, I decided to stop doing hourly consulting and spun that business down over the course of a few years. So while that business no longer exists, the shutdown was orderly and the business profitable while I operated it. Surely that is success as well.
A few of the businesses I was involved in were started to complete specific projects. An individual in my professional circle would land a nice contract and need help completing the work. A group of independent consultants would come together, form a business with partnership shares and complete the work. A few times more work came in and we kept the business going but more often when the work was complete we spun down the business. In each of these cases, I took more out of the business (financially) than I contributed so again there is an element of success there. While I wouldn’t go as far as to say never do this, I’ve moved past the need for these types of businesses in my career and question their value at all unless you really need the work and the money. There is a lack of sustainability in these arrangements.
Outright failures….or were they?
A couple of the businesses never really worked out. They cost me a few bucks (or a few thousand) that I never got back. In hindsight, however, two things came from those experiences. First, I learned what kind of businesses didn’t fit with my way of doing business. Secondly, I met people and made connections during the process of starting up those businesses. Many of those people are still in my network and we continue to help each other be successful. I learned that more opportunity can and often will lie in the relationships you build than in the actual businesses.
A few quick tips for starting a business
- You wouldn’t get married on a first date, just as you shouldn’t start a business with anyone you don’t know VERY well.
- At the very least a new business should have a checking account (and that’s if it’s just you).
- Once a second person is involved the business needs legal partnership documents (the structure of which you should talk to an attorney about).
- Find an accountant, and a damn good one, because over the course of 20 years he’s been my best friend and business adviser more often than my attorney.
- You might need a good banker too depending upon the nature of the business. Better to find one before you need them, than when you do.
That’s my quick hit short list of advice for starting a business. Feel free to jump in and add your favorite tips.
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