In Part 1 of this miniseries, we considered some fundamental points like choosing your company and website names; also, getting a professional graphic designer to create your logo and templates for things like your letterhead and PowerPoint presentations. In Part 2, we cogitated on topics like the “look-and-feel” of your website, the importance of backing up your company data, the necessity of engaging legal and financial professionals, and the requirements for marketing and networking. Now, let’s ruminate on some additional topics that may be of interest, the neglect of which might prove to be unfortunate if you don’t do things the right way.
Of course, the concept of “right way” is a bit nebulous in this context. What might be “right” for one person or company may not work for another, but it certainly pays to at least ponder these things before leaping headfirst into the fray with gusto and abandon.
When I’m performing an engineering task, I can work with any number system known to humankind, but I find it difficult to balance my checkbook. If you are anything like me, you will need to have someone else in charge of finances. Learn how these top service providers can help your business become financially stable. This doesn’t mean you abdicate responsibility – just that you have someone who has a clue when it comes to painting the broad strokes.
In particular, before you form your company, you’re going to need a business plan, you might want to consider taking up business coaching, they can help you formulate a proper business plan. This isn’t written in stone – it’s a living, breathing entity that will evolve along with your company – but you need some sort of strategy (“If we don’t have a plan, we’re no better than the French,” as we English say – words that I feel are as true to today as when they were first intoned deep in the mists of time).
How much money do you have to start with? How much money do you expect to come in the door and in what timeframe? How much money do you expect to go out of the door and in what timeframe? Someone has to keep track of the purse strings and account for fixed and ongoing expenses like wages, rent, phones, internet, office furniture, general insurance, liability insurance, health insurance, and mayhap special life insurance on the founding partners (if you have partners).
If you can’t articulate your business plan, you’re in trouble from the start. In my case, when I and two friends formed a company back in 2000, I was lucky because – in addition to being technical — one of my partners was great at the business side of things and the other was great at nitty-picky organizational details, thereby leaving me to focus on writing and engineering.
Part of your business plan is to have an exit strategy right from the start. Are you intending this business to run forever with yourself at the helm, or do you hope to build things up and then sell out to another company for a vast amount of money? Either way is good, but if you don’t know where you are headed and you can’t articulate your ultimate goal, then this dramatically diminishes your chances of reaching your desired destination.
Partners till the End
Should you form a company with partners, or should you go it alone? There’s no right answer to this question – we each have our own path to follow. I know people who have formed companies with their best friends, only to end up worst enemies. I know others who have remained staunch companions and have grown to be the business equivalent of a married couple. Whichever path you choose, I hope it works for you.
I do have a couple of thoughts to share (did you ever doubt me?). First, if you have a silent partner (an individual whose involvement in a partnership is limited to providing capital to the business), make sure they know what the word “silent” means. One of my wife’s friend’s husbands (hmm, that sounds like she has multiple husbands. How about, “the husband of one of my wife’s friends”?) recently formed a small contracting company with the aid of a silent partner who can’t stop talking and trying to direct operations. I fear things won’t end well.
Something else to think about if you form a company with one or more partners: what happens if there’s a falling out and one of the partners wishes to leave the company. Suppose they want to take their share of the company with them – will you pay them in cash (which you might not have), and how are you going to value the company?
Other possible scenarios off the top of my head include one of the partners having to move away to look after a sick relative, or becoming too sick to work, or even dying. In this latter case, what will the other partners do when the spouse of the dear departed comes knocking at the door demanding their share?
The answer to all these conundrums is to be found in Part 2 of this miniseries – the bit that talks about getting legal representation – because this is the sort of thing a lawyer can write up as part of your business agreement.
Know Your Worth
If you are planning to offer a service, you need to learn how to quote jobs. As part of this, you need to know what others charge for this type of work so you don’t underprice or overprice things.
When you are starting out, you may be a little desperate, but don’t start off by letting people talk you down (at least, not easily). If you agree to a 50% discount for the first job, what do you think they are going to expect to pay next time?
Learn how to estimate properly. How long will this job take? Remember that things always take longer than you think. Whatever number you come up with, add a contingency.
In some cases, you may agree to a retainer – that is, a guarantee of a certain number of days’ work a month for a fixed price. In this case, make sure that the agreement states that anything over that number of days will be a cost extra. Also, that this is a “use it or lose it” agreement – if they don’t use all of their days one month, those days won’t automatically roll over to the next month.
One last piece of advice here is that if someone pays you for work in advance, DO NOT SPEND THIS MONEY! Set an appropriate amount aside for taxes, pensions, etc., and then put the rest in a separate savings account and leave it there until the work is done.
This may seem like an improbable situation, but it happens more often than you might think. It’s not uncommon for a company to be approaching the end of its financial year and for departments to want to spend any monies that remain in their budget (otherwise, next year, the bean counters will say, “You didn’t spend all you asked for last year”).
So, what they do is come to you and ask you to invoice them for something you haven’t done yet with the understanding that you will do it at some time in the future. The big problem here would be if you spend the money as soon as it comes in, because when you actually do the work later, it feels like you are working for free.
Milestones and Expectations
If you are quoting on a big job, break it up into “chunks” and specify deliverables and milestones (and possibly payments) associated with each chunk.
It’s important that the customer sign off on each milestone as it’s achieved and delivered. Also, that the contract specifies that any changes the customer requests after signing off on a milestone will incur an added cost.
If things start slipping, tell the customer immediately. Depending on what’s happening at their end they may not care. Alternatively, they may not be happy, but they’ll be a lot less happy if you wait until the delivery date to tell them that you are behind schedule. From the customer’s perspective, this may trigger a domino effect of unwanted consequences. The earlier they know there’s a problem or a delay, the better able they are to mitigate against it. You also have to make sure that the invoices you are sending your customers have the right template, like a google sheets invoice template, for a more professional looking bill.
Every company has a corporate culture. I worked for one large company where it was forbidden for husband and wife teams to work in the same department. I worked for another company that was formed by a husband and wife, and that positively encouraged husbands and wives to work together.
I once visited a company in Silicon Valley. The CEO had a huge dog that she brought into work each day and that hung out in her office. As a result, all of the employees had started bringing their dogs into work. It was a bit of a surreal experience walking down the corridors glancing into the glass walled offices to see a different size and shaped dog in each room (you should have seen the lunchtime “walkies”).
I once worked for a division of a big company. The guy in charge of the division was a brute of a man who ruled by screaming and intimidation. Since this was the way he did things, all of his lieutenants followed suit. The end result was that no one enjoyed coming into work, productivity suffered, and people bailed out to get other jobs as soon as they could.
As a somewhat related point, I personally recommend that you require yourself, your company, and your employees to be ethical in all your dealings. Apart from the fact that this is the right thing to do, it’s something you can boast about.
The bottom line is that it’s up to you to set the culture of your company. What sort of a company do you want it to be? How do you want your customers and employees to remember you in years to come?
So Much to Say, So Little Time
I tell you, I could waffle on about this stuff for hours. Things keep on popping into my mind, like the importance of adopting a simple style guide for all of your company’s writings, the importance of using a copy editor (I can recommend some if you want), why having a “Death by bullets” home page on your website is not a good idea… and the list goes on.
However, I fear I am in danger of boring you, so we will pause here for the moment to peruse and ponder what we’ve talked about thus far. If you want me to continue on this topic, let me know by clamoring for more in the comments below, otherwise we will move onto other things. Until next time, have a good one!