Starting a Tech Business
- 1 Introduction
- 2 Phase 0: Preparation
- 3 Phase 1: The idea
- 4 Phase 2: The business idea
- 5 Phase 3: The core
- 6 Phase 4: The business
There's a lot of advice out there on how to start a business, but I'll share some of my experiences and advice.
Phase 0: Preparation
Before you even consider starting a business, you'll need to understand the roles people take on and why they are important. Trust me, without clearly defined roles, you will never get off the ground. And remember, you fill gaps in expertise with people who can fulfill the roles needed.
People Important to You
- An owner is someone who has complete and total possession over something. This, above all things, is the core role that drives capitalism. The wise owner takes what he has, and uses it to expand his ownership. The wise owners tries to maximize the benefit, and will spend all his time trying to understand what he can do better to better maximize everything.
- An investor is someone who brings money to the table with the expectation that the owner he is giving the money to will have great success, and that the owner will compensate him later with a massive return.
- A shareholder is someone who shares ownership of the company. In companies where there is no single majority shareholder, the shareholders have an opportunity to actually influence the direction of the company. Otherwise, they are simply along for the ride.
- Directors are people who don't actually do the work, but review it and make sure things are moving in the right direction. Shareholders elect a board of directors who direct the CEO in which direction the company needs to go, and reviews his work and holds him accountable. The Board of Directors, likewise, is accountable to the shareholders or the owner. Unlike others, the directors generally do not work full-time, and often sit on several boards.
- Executives are people hired by the owners (usually through the Board of Directors) which are given a direction and told to execute. They do so by putting the resources of the company to work, and they are held accountable according to whether they accomplished the goal or not. Generally speaking, executives always have their feet to the fire, and one minor mistake will cost them their job.
- A manager is a lesser form of executive who is given specific responsibilities over a specific portion of the company, and given specific resources to accomplish their role. Managers tend to be used to "manage" problems, that is, keep them within acceptable parameters, rather than to boldly execute directions.
- Employees show up, do their work, and get paid. Employees report to managers, whose job it is to manage the problem of employees.
The above roles should be enough to understand why executives, managers, employees, directors, and shareholders are all different people with different goals.
Understanding Getting Things Done
One of the most basic skills you need is the skill to execute and get things done. This is something that everyone is taught in almost everything they do. Here's my understanding of the process.
- Vision: Understand what you could have.
- Goal: determine to obtain what you could have.
- Plan: Understand what specific things need to happen to obtain what you could have.
- Do: Act according to the plan.
- Account: Report on what you did.
Once you've completed the account step, go back to vision or wherever you need to do.
People who have good "vision" can imagine things that other's can't. They are often difficult to work with because they have their head in the clouds. Imagine sci-fi writers, who make good visionaries. Having good vision is important because it allows you to see what is possible or even impossible.
People who are good at setting goals like to move themselves beyond where they are. They catch a vision (which may or may not come from themselves) and dedicate themselves to accomplishing it. They have enthusiasm and determination, which is often contagious.
People who are good at planning have their feet planted in the ground and understand how the things you have today can be used to bring you closer to your goal. They are realists, who know that no matter how hard you wish for something, it doesn't make it any easier to obtain. Planners and goal setters often conflict with each other because planners take reality as it is and goal setters take reality as it could be.
People who are good at doing complete the tasks they have to the fullest extent. They do things quickly and without hesitation. They often lose themselves in doing and fail to plan or even set goals.
People who account are good at reporting and communicating what has been done. Planners love accounters because it helps them make better plans. Doers don't like accounters because they slow down the tasks.
Each of these characteristics is critical, and no one person can possess all the traits. People possess some combination of the traits and that's what makes working on a team so important.
These characteristics are summarized neatly with the concepts of faith and hope. "Hope" has to do with imagining yourself in a better world. "Faith" has to do with executing those things needed to obtain that world. You also need "knowledge" to know what is possible and what courses of action lead to which result. You need to discern truth from error. You need to also hold yourself and others accountable for their own actions. These are all basic elements of Christian thought.
Teamwork is often touted as a wonder cure to all of life's problems, but in practice, it rarely exists.
Teams are formed when a group of people unite for a common goal.
Every team has a leader---someone who sets the goals that the team works towards. If these goals do not align with some of the members, it is better to excuse the dissenters and proceed than to keep them on the team.
Once the goal is set, the team needs someone to plan what can actually be done. They also need someone to divide up tasks. This is where managers become essential.
Of course, you need your doers, and with every task, there are going to be people who can do things a million times better than others. While it is important to utilize them to get the job done quickly, training others to do the same task is also important. So make training an essential part of the job early on.
And finally, you need to hold your team accountable. Everyone needs to account for what they have done, and someone needs to play the "bad guy" and make people squirm when things are not going well.
As a Christian, I understand the vast majority of Christ's gospel, the parts dealing with how man should treat man, to be the core of any successful team. If you want to see how to create a good team, adopt the practices of the Christians in learning humility, compassion, kindness and charity.
Money is the great influencer. You can believe that money can buy everything, but you would be wrong. However, money is the universally accepted thing that all people want more of, so it can be used to facilitate negotiations and encourage people to be persuaded to your ideas.
I want to explain some misconceptions that people have with money.
First, money is not dirty. The only money that is dirty is money that is earned using immoral methods, such as lying, cheating, or exploiting people's weaknesses.
Second, it is not a bad thing to have a lot of money. All other things being equal, the man with more money has a better life than the man without.
Third, money does have a cost. You need to weigh in your mind always: "Am I willing to give up X to get Y?" If you put a price tag on something, then it is for sale, and should an offer come along at a price you like, you should sell it. Other things have no price because they cannot be sold or bought.
Fourth, time is money. If you are making $40/hour, and it takes you four hours to save $5, you may be better off paying someone $5 to do it. (Of course, if there is some other benefit, then you need to account for that as well.)
Money is not just cash. You can get money from your credit cards, from little pieces of paper with your promise to return money, or just from friends. These forms of money can be counted before they are turned into cash. And it gets really confusing really fast.
Accounting is a field you must become intimate with. Understand what a balance sheet is, what an asset, liability, income, and expense is. Understand how owner's equity changes with profits and loss. Understand what it means to write off a liability, or depreciate an asset. Understand that even when money doesn't change hands, you can still lose or make a lot of money.
Once you understand this, you have to start living it. Write out your personal finance balance sheet, and write your profit & loss statement each month. Understanding how you can convert credit to cash, and vice-versa. Try to measure your concrete assets and give yourself an estimate for your "soft" assets, such as your experience, credit rating, education, and position. Start to make decisions in your own personal life based on the observations you gain from accounting for your own life.
Learn how to negotiate. I can't say much more on this.
No matter how good a friend you have, it is always a mutual agreement. You must reward your friends for things they do for you, even when they don't want a reward. You must learn how to trust someone, and how to know when that trust is violated.
When you have a small group of people you can honestly trust and call your true friends, then and only then can you start a business. If you cannot bring yourself to trust anyone, or you cannot find people who are trustworthy, you need to fix that in your life first.
TRUST ME, without friends, your business WILL fail. Even if your business succeeds, YOU will fail.
And finally, TRUST ME, when you start to create something valuable, people show up who will pretend to be your friends. You need to know how to manage that.
Phase 1: The idea
Now we can start you business. First, you need an idea. (See "vision" above.)
It doesn't have to be a great idea. It can be something obvious like "sell hamburgers".
The more complicated the idea, the less likely it is to succeed.
You will have to communicate your idea in about six words. If you can't do that, you can't explain your idea to people.
Attack your idea. Identify why it is a dumb idea. Talk about your idea with your friends. When people attack your idea, pay CLOSE attention, write down their criticism if you need to. Then figure out why they are wrong (if they are wrong), or adopt their criticism into your idea.
Phase 2: The business idea
With your idea, you now need to figure out how to make money with the idea. This is where your accounting skills become necessary.
If you cannot identify a clear profit with your idea, then you need to give it up and find something else.
If you can identify a profit, then you need to attack your idea. Why would people do what you expect them to do?
Phase 3: The core
At this point, you shouldn't have a problem building up your core business. You'll need:
- An owner: Hopefully you, but you may want to include a partner.
- A board of directors: People who are experts in their field who are willing to give your company advice. (MOST people skip this step! Don't!)
- An executive: Someone who makes things happen.
- An investor: Someone who has money to fund the business until it can make a profit, or some other investors can come in.
- A lawyer: Someone who understands the law.
- An accountant: Someone who can keep track of your money and understands money.
- A technology guy: Someone who can create the systems you need.
- A designer: Someone who can make things pretty.
- A marketer: Someone who can market your idea.
- A PR rep: Someone who can represent the company in the press.
- A salesperson: Someone who can close a sale.
That's a lot of people. Some people can wear two or more hats, and in the very beginning, you and your partner can wear them all.
HOWEVER, and this is important, if you lack any expertise in any field, you need to FIRST find someone to fill that void. Otherwise, the thing will not work.
How much money do you need? Look at your business plan. It will tell you that.
Phase 4: The business
Now you start selling your product. You may work at a loss for a long time, but it doesn't matter as long as you have a business plan.
You'll need to shift gears or direction throughout the time. You'll have people come and go in different parts of the company. You need to keep the company focused as everything around you changes.