80 percent- Stick to a business domain you know and love. Starting a new business in an area where you have no experience, just because it appears to have great potential, is a recipe for failure. There are unwritten rules in every business, and your lack of insider’s knowledge will cost you dearly. Good connections can get things done for very little cash.
- Find team members to work for equity rather than cash. People working with you need to understand their failure means startup failure, rather than expect money up front. Managing employees and contracts is difficult and expensive, and new entrepreneurs aren’t very good at it anyway. Equity is your best assurance of commitment and focus.
- Build a plan around your budget, rather than around your wishes. Entrepreneurs who start without a plan spend more money. Likewise, those who feel compelled to keep up with the popular media will spend most of their time courting investors. Most investors agree that too much money leads to poor spending decisions and lack of controls.
- Defer your urge to find office space until you have customers. Remote startup team members are the norm today and can be very productive with smartphones, video and the high-speed Internet. Office space costs money up front, requires equipment, staffing and travel expenses. With a website, your business can look as big as any competitor.
- Ask for advance on royalties and vendor deferred payments. If your solution has real value, future partners will jump on discounted future royalties, and many vendors and existing partners will understand your cash flow challenges. You may also be able to barter your services to offset theirs. It never hurts to ask. Practice your sales skills early.
- Negotiate inventory management with suppliers and distributors. For many products, suppliers or distributors will direct ship your product to eliminate your inventory. For services, don’t be afraid to ask for a retainer up front to offset your costs. Business terms are negotiable, but new entrepreneurs with plenty of cash don’t bother to ask.
- Choose a business model to optimize your revenue flow and timing. Popular examples include monthly subscription fees and optional service fees, versus one-time product sales. Another is the use of an ecommerce site, rather than retail, to facilitate product sales seven days a week, around the clock and around the world.
