Rule # 8 -Do not NOT follow good advice.

One of the best resources you can have in getting your venture up and running is to talk to other people who are successful in business and get their advice on everything from office space to marketing techniques.  While it would be most helpful to talk to someone who is in the field you are entering, it isn’t necessary.   The two people who gave me the best advice in my internet based ventures owned a chain of oil change shops and a chain of gas stations, respectively.

Another excellent source of such input is in the never-ending stacks of startup geared magazines like Business 2.0 or Entrepreneur.   It seems like every other issue has an article such as “The Greatest Lesson learned by 25 top CEO’s” or “One Piece of Advice from 10 billionaires.”

The simple fact is that “good” business practices are good in most every case.  Conversely, “bad” business practices are bad in almost every case.  A quick example: having good accounting in place is a necessity and while that won’t make your company a success, it will serve a critical role in your success.  On the flip-side, a company with poor accounting will be out of business soon.  Period.  No exceptions.  Your “eyeball math” of your bank account and bills won’t work, even if you’ve convinced yourself it will.

If someone you know runs a business and is successful, you’d be doing yourself a favor to listen to what they say. If they say, “don’t buy television ads in the last week of the month because that’s when car dealers drive the prices up…” it’s probably worth making a note of.  If they say, “you know, we found that our cell phones were getting all the calls and our 800 number was just being used to gather messages, so we cancelled the land line” you might want to jot that down.

Don’t get me wrong; if you listened to every piece of advice and implement it, you’d be spending all of your time switching directions and trying to do too many things.  The point is to listen to advice, ask questions, and then think in depth about the reason those things worked or didn’t work for those people.  In that thinking, you’ll find some obvious lessons that never occurred to you before.

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My aunt, the aforementioned owner of quite a few gas stations, told me the biggest thing she would recommend someone starting a new business is to calculate a formula for the company’s immediate worth and implement buy-out/escape provisions for the founders from Day One.  Her point was that often projects take longer then expected and the end result doesn’t always resemble the original intent.  As such, it’s good to have a mechanism in place that if someone is wanting out or needs to be removed, the value of their work and contributions has already been determined.

Even if you haven’t generated a penny of revenue, it’s important to know your company’s value.   In one of my ventures, we raised $125,000 at 10% valuation, meaning our initial value of the company was 1.25 million.  As such, a founder owning 30% of the company who wants out would be entitled to a value proposition of roughly $400k pre-tax.

Unfortunately, we didn’t put buyout and exit provisions in our paperwork and one of the founders now wants to leave.  He has stated that his contribution so far is worth 1 million dollars, which we do not have nor would we pay if we did.  Since he is not open to a payment plan over time – which also could have been in the paperwork – he is well within his rights to hold out for the cool million.  In the meantime, the rest of the founders, in addition to running the business, have to make up for the fact that the founder wishing to leave is not interested in doing any more work on the company’s products.

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Chances are, if you are talking to a “successful businessperson” they didn’t simply fall in to that position.  Even if you think they happened upon a giant stroke of luck to initially become successful, that’s likely long gone and they are actually earning every penny coming in through hard work and excellent understanding of their business, products, and customers.

Listen to what they have to say.  If you do, the chances are great that you will outright avoid many of the things that sink good businesses and ventures.

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One Response

  1. Business-Accounting

    Business-Accounting

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