Looking to start my own business (ADVICE)

[kingfc22]

I know there are many on the forum that have branched out on their own and have been successful on their ventures. I'm curious what were some of the pain points that you experienced when starting up that you did not consider beforehand and what were some areas you thought would be a breeze, but were not?

FYI - This would be a consulting firm in an industry where my business partner and I have a combined experience of over 15 years and have a solid network. There will be very little overhead such as buildings, employees, manufacturing etc.

[Suicane75]

Do you need my underpants?

[CU Tiger]

may i ask a few questions before I answer?

[CU Tiger]

[Not sure why the first post broke itself out]

1- Other than the 2 of you will you have any other employees day 1? Ever?
2- Are each of you essential to the operation? What skill do you bring that he doesnt? Opposite?
3- Will you each or either continue to work current job while starting

Those 3 cover my most basic fears...and from there I will type some other ideas when I get in front of a real keyboard

[kingfc22]

Originally Posted by CU Tiger

[Not sure why the first post broke itself out]

1- Other than the 2 of you will you have any other employees day 1? Ever?
2- Are each of you essential to the operation? What skill do you bring that he doesnt? Opposite?
3- Will you each or either continue to work current job while starting

Those 3 cover my most basic fears...and from there I will type some other ideas when I get in front of a real keyboard

Thanks CU.

Some more info about this venture. We both currently work in the live corporate event industry (for the same company). Essentially what that means, is if you work for a large company say Cisco, Intel, etc and have ever attended a company meeting, we are the ones who do all the sound, lighting, video equipment, etc. Throughout our various roles in this industry we have a very solid background in all things needed from prospecting, sales, operations through execution. We are at the point where the contacts we deal with on a regular basis essentially use the company we currently work for just so they can have us work with them on a project directly.


1. Not on day 1. We would likely hire free lance labor to assist with general event management when needed.
2. We could both run the operation individually if needed. Skill set wise in our field we are quite similar, but our approach to things can be quite different due to our general personality. Our area of weakness would be similar which would be in the technical planning phase; however, we have free lance specialists that we could rely on for this role for the time being until we decide to bring somebody on full time.
3. We would both be leaving our current positions.

[TroyF]

You may have already thought about this and this will be a non issue. If you haven't thought about it, you may flippantly brush this question off:

Who gets 51%?

There will come a time you won't agree on the direction of the business and a consensus won't be reached. That time might come in the first year of the business or in ten years. It WILL come. The 49% guy has to accept he's going to lose some battles and the 51% guy has to make sure he doesn't abuse it, but there does need to be a line there.

You need a business plan with growth models (realistic) and an idea of what to do if that growth doesn't pan out.

The first rule of a business is what would you be willing to sell it for. I know this is a consulting company with 2 employees now, but if someone came up to you in 4 months with an offer of buying you out, what is your number?

I had a franchise owner I supported who received an offer of over 350k for his business. He turned it down and told me that he wouldn't sell it for anything less than 750k. The guys business was worth less than 200k and it was going down.

I was there three years later when the same business owner sent a certified letter absolving him of his license. His assets generated less than 40k. He miscalculated badly all because he had never taken the time to truly think about what his business was worth.

[Marc Vaughan]

Apologies for the random 'dump' of queries and question - but hopefully some will be useful to you ...

Do you have firmly designated roles and which of you is the dominant/decision maker in the venture ... basically if you disagree who trumps whom or do you have an agreement that no action is taken without both people agreeing (and are you able to accept this may mean you miss some 'opportunities' which you might have wanted to take?).

The actual business itself sounds very plausible especially the limited overheads etc.

That being said make sure you're aware of ALL overheads incurred, in the US for me that'd mean health insurance if either of you has a family.

What will happen if one of you falls seriously ill for any length of time? - ie. can either of you run this venture alone, would you have the resources (and know someone suitable) who might be interested in 'temping' to cover in such a circumstance ... if not whats the plan?

Quick query - how long have you known the chap who will be your partner and do you have any 'firm' business agreed initially or will you be touting for work from a blank sheet?

Finally how much 'backup capital' do you have for this venture - ie. how long can you run without income.

PS - I presume you'll be setting up an LLC to limit any blowback on your personal finances if things don't go well?

[B & B]

Any truth to the rumor of Suicane75's underpants being sold currenty on Ebay with no reserve?

[kingfc22]

Originally Posted by TroyF

Who gets 51%?

This is a great question that we'll need to think about.

Originally Posted by TroyF

The first rule of a business is what would you be willing to sell it for. I know this is a consulting company with 2 employees now, but if someone came up to you in 4 months with an offer of buying you out, what is your number?

It's hard for me to see that happening in this business segment, but worth thinking about none the less. Especially with the example you provided.

Originally Posted by Marc Vaughan

Do you have firmly designated roles and which of you is the dominant/decision maker in the venture ... basically if you disagree who trumps whom or do you have an agreement that no action is taken without both people agreeing (and are you able to accept this may mean you miss some 'opportunities' which you might have wanted to take?).

Thanks Marc. And the more input the better at this point. Very similar to Troy's question so we'll obviously have to address this.

Originally Posted by Marc Vaughan

The actual business itself sounds very plausible especially the limited overheads etc.

A little more general info of the industry:
The industry is very small. Everybody knows everybody, freelancers work for various companies, clients work with multiple AV/Production vendors, competitors work for other competitors due to various reasons.


Typical industry services consist of AV logistics including gear/equipment, labor, venue management, working with the client's creative and branding agency (internal and external), working with the client's executive team and pretty much anything they throw at us, PowerPoint, video creation, graphics creation, logo creation, staging and scenic design and procurement.

The model we are looking to do is quite different from most. We are looking to be a consultative agency and management group. We would not own gear aside from very, very small pieces, primarily as back up and we would not have a permanent staff, rather, we will work with freelance talent, and labor companies.

Originally Posted by Marc Vaughan

That being said make sure you're aware of ALL overheads incurred, in the US for me that'd mean health insurance if either of you has a family.

This is one area where we need to dig a little deeper. Both of us could easily be added to our spouses insurance, but that cost could/would likely outweigh the cost of us setting up our company with health insurance for the two of us.

Originally Posted by Marc Vaughan

What will happen if one of you falls seriously ill for any length of time? - ie. can either of you run this venture alone, would you have the resources (and know someone suitable) who might be interested in 'temping' to cover in such a circumstance ... if not whats the plan?

We both could run this venture solo if needed and we have resources who we have targeted as potential hires should we run into the need to add staff should the need arise.

Originally Posted by Marc Vaughan

Quick query - how long have you known the chap who will be your partner and do you have any 'firm' business agreed initially or will you be touting for work from a blank sheet?

We go back about 17 years and have job hopped for much of our career (ie. when one of us finds a good gig, we find a way to get the other one in, we both succeed and move up the ladder until it is time to move on. This has happened 4 times now). We were best man in each other's weddings, etc. We are definitely only going to jump once we have "firm" business lined up.

Originally Posted by Marc Vaughan

Finally how much 'backup capital' do you have for this venture - ie. how long can you run without income.

Idea is definitely to begin with a revenue stream lined up. Right now we are talking to some of our legal contacts to make sure we are in the clear should we leave and the client's of our current company reach out to us which is where we know we would have "firm" business. Based on one-on-one conversations with some of the decision makers whom we have relationships with prior to our current company, they would be willing to throw business our way. Now locking that down and finding out just how much business is on our to-do list over the upcoming weeks.

Originally Posted by Marc Vaughan

PS - I presume you'll be setting up an LLC to limit any blowback on your personal finances if things don't go well?

Definitely.

[CU Tiger]

I read a book on small business once and it said the most common failure of partnerships were the "4 Ds"

Divorce
Drugs
Disinterest
Death

When ever you draw up your articles of incorporation address all of these with your lawyers. If your partner (or you) develop a drug addiction and run through all their money is the company liable to feed their addiction?

What if they get divorced you may soon find yourself with 2 partners instead of 1...and furthermore, two partners who hate each other.

What if your partner loses interest in the venture...should he be able to not contribute and still be entitled to half the profits.

Finally what if he dies...does his wife and her new hubby become your partners?

These are the type of things that need to be addressed BEFORE you form.


After those big 4 then think about these things.

Since neither has a unique skill set it is likely at some point in time someone will feel like they are pulling more than their fair share of the weight. At which point that partner may want to split off and take the customer base with them. In fact this was the very issue when I owned my own business. I started with a partner...3 years in he thought he was doing all the heavy lifting. He split and took 2 large accounts. A year later he was bankrupt the accounts had come back to me and I hired him to be an employee. There was a lot of pain and strife in that 12-18 months..but that is where we ended up.

Since you are both quitting your full time gigs. Make sure your quality of life is equal. Otherwise in lean times it creates quite a quandary. "I'm losing my house and you are going on vacation"..."But your mortgage is 4 times mine"...at a minimum address these items if there is a large disparity.

Regarding LLC..Id look into a 2 layer since you have a partner.

You need and attorney, he needs an attorney and the business needs an attorney these 3 need to be different people and they need to work in different offices.

[Are you getting the idea that my biggest concern for you is disputes between the 2 principals?...that's good IME 'the only ship in the world that will never sail is a partnership']


The business functions themselves and the marketing, sales etc. there are hundreds of books and resources for those things. No one talks about the interpersonal differences. If I were doing it I would insist on non compete's/. non solicitations for each of us for a 3 year period after separation.


These area starting points. Ive got a ton of thoughts and opinions on stuff like employees, image, branding, buildings,etc that I see business after business screw up. But I'll throw more of that in later.

[TroyF]

Originally Posted by CU Tiger

I read a book on small business once and it said the most common failure of partnerships were the "4 Ds"

Divorce
Drugs
Disinterest
Death

When ever you draw up your articles of incorporation address all of these with your lawyers. If your partner (or you) develop a drug addiction and run through all their money is the company liable to feed their addiction?

What if they get divorced you may soon find yourself with 2 partners instead of 1...and furthermore, two partners who hate each other.

What if your partner loses interest in the venture...should he be able to not contribute and still be entitled to half the profits.

Finally what if he dies...does his wife and her new hubby become your partners?

These are the type of things that need to be addressed BEFORE you form.


After those big 4 then think about these things.

Since neither has a unique skill set it is likely at some point in time someone will feel like they are pulling more than their fair share of the weight. At which point that partner may want to split off and take the customer base with them. In fact this was the very issue when I owned my own business. I started with a partner...3 years in he thought he was doing all the heavy lifting. He split and took 2 large accounts. A year later he was bankrupt the accounts had come back to me and I hired him to be an employee. There was a lot of pain and strife in that 12-18 months..but that is where we ended up.

Since you are both quitting your full time gigs. Make sure your quality of life is equal. Otherwise in lean times it creates quite a quandary. "I'm losing my house and you are going on vacation"..."But your mortgage is 4 times mine"...at a minimum address these items if there is a large disparity.

Regarding LLC..Id look into a 2 layer since you have a partner.

You need and attorney, he needs an attorney and the business needs an attorney these 3 need to be different people and they need to work in different offices.

[Are you getting the idea that my biggest concern for you is disputes between the 2 principals?...that's good IME 'the only ship in the world that will never sail is a partnership']


The business functions themselves and the marketing, sales etc. there are hundreds of books and resources for those things. No one talks about the interpersonal differences. If I were doing it I would insist on non compete's/. non solicitations for each of us for a 3 year period after separation.


These area starting points. Ive got a ton of thoughts and opinions on stuff like employees, image, branding, buildings,etc that I see business after business screw up. But I'll throw more of that in later.

You said it a lot better than I did. That's where I was going with the 51%. I cannot even begin to go over all the problems that come in with having dual owners.

A couple of examples that I've seen over the years:

Example A: 2 guys start a business, (Owner A and Owner B) they decide to split the business in quarters, with each of their wives also getting 25%. Owner A divorces his wife and buys her shares. owner B and his wife decides that's not fair that he holds an even 50% and demand they become equal partners 33% each. Owner A realizes if he does this the other pair will have complete control of the business. Fighting, drama, fighting, drama, fighting and it comes all crashing down with court costs and fighting.

Example B: Very similar to Carman's story with a darker ending. Two owners. Owner A decides he's better than Owner B and takes off with the customer list. Friendship ruined. Owner A struggles, Owner B stays successful. Owner A commits suicide.



The reality is these things happen over and over and over again. I'm not saying partnerships cannot work. They can and do work. But you need two people not only on the same page, but also with contractual rules to keep them there.