Archive for August, 2007

Rule #20a – The First Rule of Raising Money
August 30, 2007

If you followed Rule #1 and actually started your project, chances are you’ve made some headway on down the road. Hopefully you’re on your way to a prototype or maybe you’ve even bootstrapped your way to a finish product. As such, you are likely thinking beyond self-funding your startup and would like to have something in bank account to help further your progress. Thankfully, funds are much more readily available then you can possibly imagine.

The first Rule of raising money is to realize that EVERY dollar you take in as an investment should be thought of as a “loan.” The interest rates and payment terms will vary, but every dollar comes in the form of a loan. For example, a personal loan at a bank may come with a monthly payment and a 10% interest rate. Default on the loan if you aren’t able to pay, and it goes as a huge black streak across your credit report. An investment from your cousin Phil may come with no real interest rate and no time-constricted repayment terms. But if you aren’t able to make a return on the investment (“default on the loan”) then things will be extremely awkward around Phil at every family reunion from now until the end of time.

Without exception, every dollar you raise for your business should make you feel in your stomach like you have taken out a loan because that is exactly what you have done. You are on the hook in some way – financially, emotionally, socially – for every dollar you raise. Remember that. Always.  It may be called an “investment”, a “gift”, a “nominal sum, or “an advance on what you’re getting out in the will.”  But in some way, shape, or form you need to call a spade a spade: the money is a loan.

Robert Scoble >>> Egg on Face
August 27, 2007

At present, there are more then a few sites talking about a recent video in which Robert Scoble describes how and why search engines that are created by people in one way or another, a la Mahalo and Techmeme, will overtake Google in popularity in the next 4 or 5 years.

Robert Scoble is probably a nice guy and a smart person.  But in this case, his thesis is ricidulous to the nth degree.

The best explanation comes from the Ted at Uncov when he says, “Robert Scoble doesn’t understand why man invented machines in the first place. The printing press was not a machine designed to facilitate a bunch of people all hand-copying the Bible in unison. A human being will always be able to classify a search result better than a machine. We use machines to do this because the problem is just too big for humans to do. If the machines aren’t doing a good enough job, we make the machines better, we don’t add more people.”

Perfectly said.  In the time it takes Mahalo to get enough search results to matter to anyone outside of Silicon Valley, Google will have further refined its algorithms to remain one step ahead.  In their most base form, machines exist to make tasks simpler for humans.  Man could build a fire and cook a piece of cod over it, or he could just pop it in the oven for 20 minutes and get the same result in less time and for less energy.  Same principle applies with computers and the internet and search engines.

It’s a nice idea to think that the people will eat the machines and not the other way around, but for the purposes of searching things on the internet, it simply isn’t the case.

Facebook has decided to guess what you want to buy…
August 23, 2007

Fantastic news for everyone!  Facebook has outright declared that their new advertising system will not only offer you things you want, but will also offer you things that they think you MIGHT want in the future based on the contents of your profile.  HOLY CATFISH IN A CAN.  Here we have a website that is growing in popularity at a staggering rate and rather then hide behind vague rhetoric like Google and other ad servers, they come right out and say it: we are taking the info you give us and analyzing it, analyzing you, analyzing your friends, your life, your likes and dislikes.

Forget that the end result is serving you advertisements (that’s its own issue), but it takes a mighty large pair to overtly state, “We’re taking the info you give us and using it the way we see fit.  Deal with it.”  Not to be all “tinfoil hat” about this new system of user-analysis, but this is a very slippery slope.  I don’t know what I find more interesting; the fact that Facebook comes right out and says what they’re doing, or the fact that scores of users will not care in the slightest.  Below is the text of a blog post I wrote in March of 2006 on a now inactive Blogspot blog.  Substitute “Facebook” everywhere you see “Google” and you’ll see what I’m getting at.

_________________________

A profound sense of irony hit me today when my older brother told me he was impressed so far with Google’s entry in to financial news. I have been and continue to be a big fan of Google, but not without a bit of protected skepticism. My brother, on the other hand, has long called the whole ad-powered, content driven web phenomenon (of which Google is the unquestioned leader) a “house of cards.” He sent me a note about their new financial site and said that it was beginning to look like the model Google is working with might indeed survive the long term. He opined that indeed, the sight might not crumble.

They aren’t going to crumble, not in the slightest. But keep in mind that as much as I like Google, their ultimate goal is very Brave New World-ish. They openly state that their goal is to index all of the world’s information – not all of the websites on-line, but “all of the world’s information.” Your gene sequences, the pattern with which you brush your teeth, all of it. The thing people are slow to realize is this: Google is not a software company or internet company; they are a media and advertising company that happens to own the most intelligent aggregator of information in the history of the world. Their websites and services are simply portals to force advertising down your throat and deliver hot-leads to whoever is willing to pay for them. The more information they index, the more they get to know YOU, presumably so that their ads are more relevant to you when you see them. The question we must ask ourselves is, “is that a good thing or not?”

Regarding their indexing of all the world’s information, let’s look at an example based on the technology they have now: Currently, if you log in to your Google desktop and enter a search for “Baseball cards” on Google, it brings up some ads of people selling baseball cards. You get the results you want and it logs the search for easy reference within the Google Desktop application. All is right in the world. Of course, this is not the end goal of Google…

Fast forward 10 years – let’s assume/presume that you use a Google software suite for email (as I do), and you’ve emailed some friends about your baseball card collection and how you need a Coco Crisp rookie card to finish your set. You also use a Google Office suite spreadsheet application (on the way) to track the baseball cards you have and missing in one of the cells of your list of cards is the name “Coco Crisp.” And you use a Google maps application (already here) to get directions to an upcoming baseball card show. At this point, when you enter “baseball cards” in Google and search, the software not only searches conventionally, but it also digs for every reference to baseball cards you have in your emails, documents, and spreadsheets and it says, “A ha! He needs a Coco Crisp card!” So, all of the ads show not people selling cards but people selling Coco Crisp cards. At the same time, you are hit with a dozen emails from people who know you are looking for a Coco Crisp card saying that they’ll be at the baseball card show you searched on Google Maps if you’d like to stop by and look at the Coco cards they have. Seems mostly harmless and actually might be pretty useful.

Now, less pleasantly, imagine that someone in our family gets a terrible disease. You email me about it and then search Google to learn about the disease. Now, instead of baseball card owners, you\’re getting hammered by doctors, pharmaceutical companies, malpractice lawyers, and undertakers all “offering” to help you with everything you could ever need in this tough and difficult time. Just so you don\’t feel alone, they\’re hammering me too since you brought me in to the conversation via email. (Thanks a lot) Furthermore, since they\’re so darn smart, Google is telling you that the affliction is hereditary and your chances of getting it are greater than you thought. Upon hearing that, you\’re in a bad mood, but the power of Google is just getting started. As part of this service, they also recommend you visit your doctor about it, and since they have pulled his name from your google address book, they have already scheduled you an appointment. (Since I\’m your brother, they\’ve done the same for me, only I don\’t show up since I don\’t like Doctors.)

All of this information is of course indexed (remember, they are trying to index all the world\’s information), so your life insurance carrier, who is using Google to monitor customers, stops your coverage because of this newly found risk. As a chain reaction from it, the health insurance company covering our family member finds out that there has been a change in YOUR coverage (info found through Google) and through a little digging, they find out why. As such they cancel the family member\’s insurance too. Upon hearing this, you and I get angry and we decide to bulldoze the office of the aforementioned insurance carrier. Problem is, we used Google\’s instant messenger to plan our mission and the local police department has been apprised of our intent, so they are waiting for us when we get there. The end result is that you and I are in jail without life insurance, our sick relative is at home not getting treated because they don\’t have health insurance, and all of our visiting hours are filled with lawyers, doctors, and the occasional rogue insurance agent offering to further help us with our problems, all of which were caused because we let Google get to know us so they could create a better advertisement targeting method.”
Think in can’t/won’t happen? The US Justice Department has won access to Google’s database of info, including user information. Furthermore, Google displays different targeted results for every country in which they have a presence. For example, sadly, people in China who use Google can’t learn about much of their history because the government managed to convince google to delete it from the Chinese-access database. Think about. The combo of acquiescing to authorities while collecting information about the masses is dangerous and a way slippery slope.

So, kudos to Google and the growing number of pies they have their fingers in to….just don’t say you weren’t warned that the filling may be sour.

Advertising.
August 17, 2007

I am a very vocal opponent of the “Google AdSense as business model” theory. In short, this is when someone has an idea for a website and determines that the best/only way to make money is to slap ads on it. Sure, they may find an ad network that pays well or whatever, but in the end, it’s all the same. Littering a website with ads isn’t likely to make you any richer then putting a tip-jar on the homepage and asking for donations. I’ve covered the reasons why before.

That said, it’s important that my position be clear. I think advertisements serve an invaluable role both online and offline. I actually work in marketing and advertising, so I have seen the effectiveness of it from both sides and can personally confirm the adage (pardon the pun) that “Advertising works!”

So, what’s the big deal? Simple. Advertising is good when it serves the viewer’s interest and it’s bad when it doesn’t. The vast majority of internet advertising, particularly AdSense and similar code, is bad advertising. The knee-jerk reaction would be to say, “Well, Google is worth a zillion dollars so their advertising can’t be bad, you doofus.” My response is one from the basketball court: just because a shot goes through the net doesn’t mean it was a good one to take. Sometimes a great result doesn’t justify a bad action.

Good advertising serves the viewer’s interest all of the time. Pepsi advertisements during NBA games on TV suggest to me what beverage I might want to try when I need something citrus-y but not too sweet. Movie advertisements let me know what’s going to be at the theaters in the next few weeks so I don’t miss a film I’ve been wanting to see. Thursday newspapers (which feature the highest ad-rates each week) let me know what car dealerships are having sales if I am wanting to go buy a car Saturday morning. Good advertising informs the audience of something that may be of benefit to them. Good advertising communicates a message of value in a way that entertains, even if only for a second. Good advertising does not have to be unobtrusive; getting hit over the head with a message when we don’t want to is an important part of helping you remember the message when you do need it. (This is what we call “branding.”)

Bad advertising is the opposite of those things. Bad advertising does not inform you. Bad advertising offers nothing of substance. Bad advertising tries to hide in plain site. Bad advertising brands products and services you will either never need or never choose based on an ad campaign (e.g. finding a good heart surgeon, wherein recommendations from trusted friends and your family doctor would go a lot further then a radio ad).

Online advertising systems like Google’s Adsense, which I’m citing because it is the most well known, suffer greatly from all of the things that make bad advertising “bad.”  Consider:

  • Adsense hides in plain site. Sitting on the side of the page, in text similar to that of the rest of the page, essentially whispering, “don’t mind us…we’re not getting in the way over here…but it wouldn’t hurt you to give us a click every once in a while, would it?”
  • Adsense text is painfully boring. The Adsense software doesn’t allow for the use of words like “Best” or exclamation points. By flattening everyone’s message, they’ve flattened the effectiveness of the ad unit. There is basically NOTHING that can be communicated in 3 lines of text. No substance in message, no enthusiasm in delivery and presentation. So the user is left clicking thru the ad to get any real and useful information. Of course this is what Google is hoping for, but it makes the advertising itself very poor. Imagine if the next ad for a car sale you heard on the radio was, “We sell cars….we are located in your city 2 blocks from your house…visit us for more information.”
  • Adsense is not targeted very well. At all. To be fair to the folks at Google, I’m sure they have an army working on this every day, trying to find a way to personalize and target their ads so well that exactly when you need something, that’s what you’ll see. But if I send an email from my Gmail account to my wife talking about how good the rum-cake was at last night’s dinner, that doesn’t mean to put advertisements for rum-cake recipes below the body of her response.
  • Adsense advertises products you will never use or will not choose based on an ad campaign. See the above rum-cake story.

As a result of the failings listed above that are in no way limited to Google, online advertising has become a disaster 95% of the time. Even worse is that people who don’t know any better think that placing ads on their website is a harmless and possibly beneficial idea. There is a future in advertising online, but for the love of Pete, please quit supporting the models that are “bad” advertising.

And since I don’t like when people complain but offer no real solution, here are some tips for saving online advertising and how to integrate it in to your site/product without becoming part of the current problem.

  • Don’t be shy. The best use of advertising online right now in my view is when I go to Desktop Tower Defense and have to endure a 5-10 second ad while the game loads. Simple. We have an implicit agreement – I want to play the game, they want to advertise to me while they get it ready. They don’t have little text ads surrounding the game in hopes that I click on them. They show me the ad when I show up to play and that’s it. With the proper team behind it, they could be selling good quality adspace to tons of companies in a way that suits the customer. Quit being so coy about the fact you have advertising. Put it where I’ll see it, then let’s go on with our lives in a mutually beneficial way.
  • Don’t be boring. I’m not talking about strobe lights and disco balls. But advertising as content is at its best when it is entertaining or thought provoking. The caveman ads for Geico…the Budweiser frogs…so on and so forth. Advertising is a medium of design and art. It doesn’t have to be a banal necessity of entertainment, but rather can be part of entertainment itself.
  • Be direct. If you want me to buy a Mercedes, show me a Mercedes. If you want me to book a trip to Cancun, show me some video of the beaches there. James Joyce couldn’t describe the Eiffel Tower in 3 lines of Adsense text so it’s a pretty safe bet the folks at “Bob’s Travle Agency for Trips to France” won’t be able to either.

Advertising online doesn’t need to be thought of as a bad thing relegated to the outside column. I don’t think the internet is a “place” where ads should be plastered because that sort of thing is a terrible idea and will have terrible results. But advertising is a form of design, a form of art, a form of entertainment, humor, drama, and intensity when it is done well. When advertising is done well, it has a place on television, a place in magazines, a place on the radio, and will eventually have a place on the internet. We just aren’t there yet.

Rule #19 – Competition has nothing to do with success.
August 14, 2007

I was doing an audit of the competition that exists for a new startup I’m working on and I was shocked to see how many players there are now in the space.  When we started, it seemed like there were 3 or 4 big, established brands and then a dozen or so small entities that were middling about, not really doing much other then treading water.  Now, it looked like there were 7 or 8 established competitors and 30 or more smaller upstarts (ours included) trying to enter the fray.  Worse yet, the new upstarts appeared to be working with a purpose and a plan.   Some of them even looked like they were making some headway.

At first I was disheartened, thinking that the challenges we would be facing were now going to be much harder then they were a year or two ago.  However, nothing could be further from the truth when it comes to evaluating the quantity and quality of your competition and your marketplace.

The fact is that every marketplace has lots going on and lots of people working in it.  In the very rare event that you enter a market or field with little competition, you can be assured that the moment you demonstrate that you can make money in that industry, someone else – a lot of “someone elses,” actually – will quickly come along to fight you for those dollars.  Happens every time, no exceptions.  Even markets that have a clear leader (Online video – YouTube….Search – Google…) are crowded.  Frankly, they become more crowded more quickly then markets with no clear leader.  Why?  Because of what I said before: demonstrate you can make money in a market and someone else will enter it.  In the case of the examples listed, if you demonstrate that you can make A LOT of money in a market, everyone with a pulse and a PC will try and enter it.

As such, you really shouldn’t spend any time worrying about the other guy.  For starters, there is absolutely nothing you can do about it.  You can’t control how they work, what they offer, and how customers respond to them.  You can’t control their business model or cash flow or anything about them.  Even worse, the time you spend worrying about the competition is time taken away from the only thing you can control: how your business runs.  Don’t do that.  At all.

The thing that will make your company and product successful are you and your staff.  Your execution.  Your deployment.  Your customer service.  Your updates and upgrades.  Your pricing strategy and the value you offer.  Do those things well and you have a good chance to succeed.  Do them poorly and you are toast.  Your competition has NOTHING to do with that.

The rules of business are pretty simple:  offer a product at a price equal to or less then the price at which a customer values that product and you will generate revenue.  Offer a product at a price that the customer does not agree with when making spending decisions, and you will fail.  2 + 2 = 4.

You will always have competition.  Most of the time you will have more competition then you like, and some of the time you will think that the competition is too great for you to survive.  That said, always remember that there is absolutely nothing you can do about it and you are wasting precious time every moment you think about the other guy, because he’s probably not spending time thinking about you.   He’s working his tail off to improve what he can control about his own business…which is exactly what you should be doing.

Rule #18 – Make customer service simple
August 9, 2007

As I type this, I am on hold with a cable/DSL provider trying to schedule a service call.  The online scheduling tool determined that I had made an error and suggested I call the main tech-support line, which I did.  The dizzying number of options presented to me was staggering.  Here’s the options I went through…

“Press one for English two for Spanish” – *beep*

“For phone related issues press one, for television issues press two, for high speed DSL issues, press 3” – *beep*

“If you do not have an internet connection press one, if you would like to activate your connection press two, for all other issues, press three.” – *beep*

“If your issue is related to hardware one, if your issue is related to something else, press two” – *beep*

“Please hold while I connect you with a representative.”

 ____________________

This was after I had already given my account number and last four digits of my social security number.  At no point in this nightmare was I presented with the option of simply talking to a representative, nor was I given the option of scheduling a service call.  Now, aside from the fact that service calls are extra money in the coffers of the cable company (which means they should be pushing them as much as possible on a tech support line), I can not imagine that most people calling the tech support line are in a good mood.  Chances are, the television went out during the 4th quarter of the Cowboys game or the internet just disconnected them from MySpace.  As such, while an automated tech support system may offer a universal set of options, the vast majority of people calling want to fix their problem as fast as possible, which means talking to a real person.

Navigating an endless sea of touch-tone options is the worst option possible.  In the course of my call, I was trying to find the option of “talk to a live person”, which should have been one of the first options presented.  It wasn’t given as an option at all until I had made half a dozen selections.

Once your product or business is off the launchpad, the most important facet of your endeavor is going to be how you treat your customers.  While you might think it would be nice to have an automated support system in place so you’ll have more free time to lay on the beach, nothing could be further from the truth.  Your business, in all likelihood, has value because you are offering to help solve a problem for each customer you have.  That is serious work.  Not paying attention to how you treat customers AFTER they have become your customers will make them someone else’s customers very quickly.

No amount of debugging will make things work perfectly with your product every time for every person.  Some customers will simply astound you with their level of incompetence when using your product or service.  That is not their problem, it is yours.  If you can not figure out how to help that customer – the one who thinks a CD drawer is a cup-holder or the one who thinks that their monitor is a photocopier – then they will cease to be your customer.

Some tips on how to take care of your customers very, very well.

  • Have your contact information (phone, fax, and email) easily labeled on your site.  Far too many websites hide this info, hoping that difficulty in finding it will make the person needing service give up.  Now, why in the world would that be a good result?
  • Have an option very early in any call to your phone allow the customer to talk to a real human who can help.  If you can have a real human answer the phone and address the problem immediately, even better.  If not, make any instance of hitting “0” ring through to a human; that’s the first instinct people have when trying to get to a real voice.
  • Let your customers know through your “hold music” or an auto-mated email how long they should expect to wait for your attention.  If it takes you 24 hours to get back them, say, “roughly one business day.”  If it takes you 10 minutes to get back to them, say, “within the next hour.”  Underpromise and overdeliver.

Never, ever forget that the customer deserves the same attention, time, and understanding that you want to have when you need service.  Never ever forget that when people need service, they are calling about a problem they have determined is beyond their own grasp.  Pushing them off on an endless maze of phone-prompts or long response times will quickly make them someone else’s customer.

Web 3.0 very poorly defined
August 8, 2007

From Read/Write Web

“Google CEO Eric Schmidt was recently at the Seoul Digital Forum and he was asked to define Web 3.0 by an audience member. After first joking that Web 2.0 is “a marketing term”, Schmidt launched into a great definition of Web 3.0. He said that while Web 2.0 was based on Ajax, Web 3.0 will be “applications that are pieced together” – with the characteristics that the apps are relatively small, the data is in the cloud, the apps can run on any device (PC or mobile), the apps are very fast and very customizable, and are distributed virally (social networks, email, etc).”

To be fair, Eric Schmidt is the CEO of Google, so he’s pretty smart and in a pretty good position to see the future of the internet. Furthermore, Eric Schmidt probably doesn’t care what Web 2.0 or Web 3.0 or Web 63.5 are since the company he stewards will likely be a big part of whatever developments occur regardless of title.

That said, I think his definition misses the mark. Not because I know what Web 3.0 is going to be (I don’t, and frankly, I don’t care) but because what he has described essentially already exists. It’s called “the internet” and can be accessed via what people call a “browser.” Think about it. Schmidt is describing what already exists – you open a browser, you go to a destination URL and you do whatever it is you set out to do. Apps already talk to each other; for example, RSS feeds and email alerts combine information and transport it from one website to another. You can customize the color of your MSN home page, you can choose what useful little doohickeys show up in your browser. Maybe I’m not writing this well, but what Schmidt is describing sounds like a faster version of the internet we already have.

That would be Web 1.1, not web 3.0.

However, his definition begins to make sense when you look at it from his view. In a perfect-Eric-Schmidt universe, everyone would go to an iGoogle page to access all the apps of the internet. They would run as widgets on your iGoogle page and have compatibility with other Google products. You wouldn’t leave one page for another because the access to applications would all be in one place. The days of going to another URL would be gone, as everything you need would be in one place. When you look at it that way, Schmidt’s definition of Web 3.0, in my opinion, is “moving the internet from the browser to the internet itself.” And if that’s the idea, then the portal wars are just beginning.

Great Minds think alike…
August 7, 2007

One of the great minds over at 37Signals agrees with me (or I agree with them, whatever) that Nick Gonzales’s ridiculousness over at TechCrunch is worth a good lashing. Read about it Here

Congratulations! We’ve ruined the internet
August 5, 2007

I try to be a reasonable fellow, but things finally came to a breaking point this weekend at TechCrunch when an instant messaging application built for the iPhone was bashed. And why? You’re never going to believe this…

…because they are charging users for their software.

OH THE HUMANITY OF IT ALL.

The earth is eating itself. The sky is falling. And the Big 10 may finally win the Rose Bowl. What is the iWorld coming to that a reputable source of tech news is posting a negative view of a company because that company has an actual business model? Surely, the kiddos at the Crunch must be kidding? As I posted in the comments of that post, I find it to be disgustingly ironic that we American programmers seem to turn our noses up when a software application is not free to use and/or open source. Nothing says socialism like someone putting their idea in to an incubator, doing all the work to build it, and then saying, “ah, screw it. Let’s make it free to everyone!”

Even worse was the author stating that an alternative to charging for the service – in this case $11 – was to insert advertising in to the application. Are you kidding me? Nothing says “technology’s next generation” like turning the internet in to a highway of billboards and marketing materials. As I’ve said before and will say over and over until I’m choking on the words, building something online and plastering it with advertisements is not a business strategy. Pardon my French, but that concept is a chicken-shit way of declaring that you are either too scared or too uncreative to figure out a way to get people to buy your product.

Why does this happen? Simple: developers and reporters with this concept in their heads are terrified of angering the nerdscape at large by actually asking for money in exchange for their software. As such, they don’t want to step on toes, thus they make everything free and put annoying advertisements all over the page hoping to cover hosting costs until Google buys them for an inflated valuation.

In the meantime, developers and companies with actual testicular fortitude ignore the geek-o-sphere and sell their wares to people who don’t give a shit about drop shadows and AJAX. As a result, ad-based companies try and survive with a very low chance of success while sales based companies thrive in the shadows.

Moral of the story: If you want to be a Rock Star, build something and let people use it for free. With a little luck, you will turn out like a real rock star, gaining legions of fans yet still eating raman noodles with no money in the bank, e.g. Kevin Rose and Kris Tate and a slew of other folks who built community and still can’t figure out how to make a dime.  On the flip side, if you want to be a successful businessperson with a successful business, charge people for your software and quit worrying about getting a nod of approval from the Valley. As I’ve said before, your product is worthless if no one will pay for it.

Accountant or Lawyer? What’s more important….when do I get one…?
August 3, 2007

If your venture ever does anything of note, you’ll likely need to retain the services of an attorney and an accountant. Of course, if you are building a startup and every penny is worth its weight in gold, you probably are trying to figure out how to balance the need for an attorney and an accountant and your ability to pay for their services.

These folks do not come cheap. Expect to pay no less then $100 an hour for any accountant or attorney worth a lick at a firm. In private practice or free-lance, they might be a bit less. In many cases, these folks cost much, much more. Very few industries have price dictated by the market as well as the legal world; expensive attorneys are expensive because they are good at what they do. Cheap attorneys are inexpensive because it is their only way to attract clients. Also, keep in mind that many attorneys often ask for a retainer up front. My experience has been that accountants may not.

On occasion, the attorney or accountant may offer to take equity in your company to provide their services. This is a terrible idea. (1) Your company will never be worth less then it is at the moment you decide you need their help. Giving them equity gives them an extremely amplified return on investment if you ever make any real money. (2) You will likely find yourself waiting in line behind their paying clients. My advice is to save up the money for the retainer or simply find a different attorney/accountant.

When should I go on and turn my financial record-keeping over to an accountant?

  1. When you begin hiring – and thus paying – other people.
  2. When you begin taking in revenue.
  3. When you find that your little hobby is extending out of your home office.
  4. When you decide you’d like to bring in investors and need to set up a company structure to do so.

There are other times you will want an accountant, obviously, but the chances are great you’ll run in to one of the 4 things listed above first. At that point you should flip the switch and turn things over to a professional.

When do I need a lawyer?

  1. When you decide to enter in to a partnership with another founder, client, or partner.
  2. When you decide to raise investment of more then a few hundred dollars from someone.
  3. If you decide to try and protect the intellectual property of your idea.

As with accountants, there are dozens of reasons to call on a lawyer. but the great likelihood is that you’ll run in to one of these reasons first.

Most attorneys and accountants will give you an hour of their time for free just to try and see if what you are trying to accomplish is something they can help with and is something they can fit on their plate. Before you go to these meetings, have a clear understanding of what it is you are trying to get out of the money you might spend with them. Are they there to write contracts? Or will you be using them to fight off IP infringements? Do you simply need someone to handle payroll, or someone to perform a cost-analysis study every 6 months?

When I met with my attorney for the first time, he asked me what it was I was trying to accomplish. I told him about my idea, about raising money, about growing, etc. He asked what I needed him for. My response, “Your first job is to keep me out of prison.” While it certainly sounds dramatic, we quickly reached an understanding that his primary function would be to help me and my associates navigate the legal landscape with which we were unfamiliar. As such, he realized he would be taking a lot of phone calls asking, “Can we do this?” or “Is it legal to do that?” not because we were trying to skirt the law but because our focus was making sure we always operated within it. Other things – contract writing, litigation, etc. – came secondary to making sure we kept our boat between the navigational beacons, so to speak. I recommend you do the same. It will make it much easier to find the right accountant or attorney when you decide it is time to look for one.