Saturday, April 30, 2005

Good bones

I keep feeling a need to start writing about the blue-sky stuff swirling around start ups. That part is so fun and so beguiling, I can't wait. However, I also hear the cartoon "good" angel whispering in my other ear, over and over, "Good bones first. Good bones first...".

If you don't build in good bones from the outset - that is, a solid structure to support your enterprise - you can quickly drown in blue sky. In my opinion, you shouldn't even start until you get the following things underway. It doesn't cost you anything to get smart. There are low cost entry points for all the following subject areas. You just need to find the pieces that fit you and your budget.

Accounting. You need to talk to a few CPA offices before you start. You need to present the case for your enterprise and how much of it you want to do under their supervision. Ask if they want to be involved and how much it's going to cost. The CPA won't do your books. You will do the books initially, and you'll be supported as needed by one of their lower rate employees. Good people, that they've trained in their systems. So that at year end you're not scrambling at tax time. It's all there, done correctly, consistently and independently. Good CPA outfits would be wise to have some kind of free start up tools in a box available for this situation.

Others will disagree, but I believe even the smallest enterprises need numbers that are certifiable by outsiders for those numbers to be worth a damn. It's not a cost to you, it's a benefit to you. You can trust the numbers and sleep better at night knowing you haven't blown something important inadvertently. Unless of course, you really love reading business and tax law.

If not today, then sometime in the future, when you've got less time and capabilities for making it happen, you're going to need to present numbers certified by outsiders. You'll need to show your numbers to someone you really need to understand your situation... bankers, investors, grant folks, tax auditors, god-forbid. Start now. Start when there are no problems of retrofitting your accounting data into yet another software program. That always, always, always beautifully illustrates the famous efficiency task of stuffing 10 pounds of crap into a 5 pound bag.

Once you get your accounting protocols in place, it becomes easy background noise for the fun stuff ahead. Without those protocols in place, I sure hope you're really lucky.

Insurance. You need business liability protection. It's not expensive. You can add bigger umbrella coverage cheaply. Yes it's a cost, but you get to sleep at night. My kind of benefit. We're trying to make this sustainable, remember?

It doesn't matter how benign the stuff of your enterprise is. Get the insurance. Talk to several agents. Get it from an agent you like. They're business people also. They need to do their best for you to keep themselves sustainable. Good ones will explain carefully what each part of their policy does for you. Most small start ups will need coverage for general liability and medical expenses. Most startups (my kind anyway) don't typically have much physical property involved so the costs of that portion should be cheap.

Personal health insurance is another subject for another blog. That's the 500 pound gorilla in the corner for small start ups, and I want to give it it's due.

Insurance companies would also be wise to put insurance specific start up info in a box and hand it out to attract business.

Data management. While I was traveling this week, the first comment came into the blog. Thanks, Don! What Don posted should be a good lesson to anyone reading this. I can tell Don's been through the start up wars because he's talking about seemingly boring stuff that makes or breaks enterprises. Don knew to focus on it as mission critical... "We also spent the first two, very difficult, years standardizing on the tools we use and our businesses processes. That's how we're still around...". Word from the trenches. He's right. Pay attention.

You can start with pencils and notebooks, but you'll need to go digital as soon as possible. There are many tools and many approaches to this problem and we'll parse them out in time here. For now, try to anticipate every separate data point that you can think of and find a way to capture them in a way they can be searched and manipulated in every single way possible. You won't get them all but if you're smart about designing your info systems they'll stay flexible forever and can grow with you. I'll blow up this data management section into a million more postings as time goes on because, well, I love this part and it's REALLY important.

Banking. A little secret here. In spite off all those puppy kissing bank billboards and electronic ads, you're not really big enough for them to really care about. Sorry to break it to you. However, until something goes haywire, it's possible that someday your company will be one that banks would run down an alley after. As long as you're not expecting too much, banks have a lot of good perks for small start ups.

Banks are not a good source of start up money. It's not their job. They are better at financing on-going operations. You'll want to have a demonstrable "good citizen" track record in place before that first real money meeting; you know, the one you wear your best clothes to. Build your track record with a bank you like, starting now.

Most banks are OK with new business mechanicals, but every one I've worked with could have been a LOT better. I've got an idea... what about a banking version of "everything in a box" kits? Have I heard this somewhere before?

Legal. As an attorney, I'm a very good plumber. Everyone's circumstances will include a greater or lesser need to lawyer up your enterprise from the beginning. There are simple, low cost ways to do the initial registration stuff on line. This is ideal for a single person as owner. For most of us, we may not need much more lawyering at this stage of our enterprises. When you add a second person as an owner (please don't tell me you're friends and nothing can go wrong) you need to get advice from an attorney. The problem is not how either of you are going to get INTO business together, the problem is how you're going to get OUT of business should that become necessary. More on this later. For other people with more complicated financial lives, you probably need better planning up front. That's going to have to be your call.

Law firms are businesses, too. They need new blood in their customer pool just like everyone else. Even if you can organize and register your business without a lawyer, you'd better be thinking about finding one you'd like to work with, should it become necessary. Talk to a few. Most will explain their fees and requirements without charge. It can't hurt. Many lawyers even tell lawyer jokes!

Summary. If you want you and your business to be sustainable, then build in good bones from the beginning. Accounting, insurance, data management, banking and legal.

For those professionals interested in start ups, I should start helping them design "Start Up In A Box(TM)" kits to fit their circumstances. Good idea. Note the TM. Starting 'em mid blog. Damn.

Professional enterprises need to be sustainable too. They need effective ways to find you to keep growing their own enterprises. It would be a great benefit to these professionals to get you up to speed as fast as possible about what it takes to work with them.

As start ups, we would benefit from user friendly introductions to their brands of information. Start ups and expanding enterprises should always be looking for a great fit with market partners. Start Up In A Box Kits. It would sure make our jobs as start ups one hell of a lot easier. Then, bring on the blue sky.

This emphasis on good bones is NOT an unnecessary paper pushing exercise, slowing down your ascent into lofty entrepreneurial heights. Without good bones, your new enterprise will turn into just one more thing causing problems in your life.

Done right, with good bones in place, your own sustainable enterprise can be one way out those problems.

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