So, you’ve got an idea for a tech business, but you’re unsure about your prospects. Do you know what are important strategies to consider before starting a tech business?
Joey Tamer is a strategic consultant to entrepreneurs in technology and digital media, and to experienced consultants in all fields to maximize their practices.
She knows where to find capital and she is a wonderful person with whom to work – a true professional.
Here are Ms. Tamer’s answers to questions on how to launch a tech business:
Q: How much capital do you recommend?
A: Have at least one full year’s capital to support yourself and the costs of your business before beginning; have six months of capital liquid at all times. Nothing kills a business like lack of capital. Recovering from an under-capitalized business failure, particularly one fueled by debt, can take years. Beyond that, you are likely to make mistaken decisions based on the pressure of your debt. Capital allows you options and room and time to stumble.
Q: What kind of support system do you recommend?
A: Ensure your partner’s support. No matter what kind of business you start, get your partner’s support. Nothing will erode your joy or confidence at becoming an entrepreneur faster than negativity at home. What does your partner really feel? If you have chosen a business partner, ensure that partner’s support by creating clear legal documents spelling out ownership, roles, and responsibilities, including a buy/sell agreement, should one of you change your mind.
Q: What do you mean by planning for the hidden year?
A: Understand that there is at least a full “hidden” year in beginning your own business. This includes the thinking, the planning, the testing, the preparation…before you actually get into play, begin to raise capital, or bring your service to a client or your product to a market. Plan for the time and cost of this hidden year.
Joey Tamer, www.joeytamer.com
Q: What about assessing the risk of capital?
A: Whether you risk your own money to begin your business, or your extended family’s and friends’, or outside investors’, be careful to understand the impact of taking this money for your venture: what it will mean to succeed, and to fail with it; if and how it needs to be paid back or rewarded. If possible, build your first business simply, without needing outside investment, to go up that learning curve with less pressure. If possible, do not risk your mortgage or your pension to build this first business.
Q: What about starting a service vs. a product business?
A: Product businesses require more time and capital to build than service businesses. Certain back-bedroom businesses, particularly Internet-based ones, can reduce your capital outlay. Consider building a service business, like consulting or internet-based services, focused on your professional expertise, for your first business. If you do build a back-bedroom Internet business, put out your product or service as soon as possible, even as a “free trial” offering, so you can understand the market response. From this response, you can adapt or expand the product or re-direct its target market before too much time or capital is committed to an untested idea.
Q: You offer a great reminder that business is not revenue and revenue is not profit. Can you explain?
A: You may be fooled that you are working successfully because all of your time and thoughts are absorbed by the new business. Not true. Being busy does not necessarily create revenue. And revenue coming in does not necessarily create profit. Learn to work smart, not hard and to judge whether you are adding any profit to your pocket – what remains after the business costs and the taxes, including a reasonable salary to you. The IRS considers any business that does not show a profit within the first five years to be a hobby.
Q: You recommend getting needed expert help by creating a virtual team. How so?
A: There is much that you are expert in; there is much you do not know. Get the help you need from industry experts in start ups, technology, finance, marketing, law and so on. Network among your colleagues, friends and groups to find these experts, and pay the experts what they are worth. Get at least five references on each candidate and check every one.
Be clear what you need, what the expert will provide, and what costs you will pay for that help. If your expert does not completely please you during the first couple of months, determine what needs to be done to get you satisfied. If that fails in the next 30 days, find another person to help. You can create your initial staff through virtual teams, avoiding the complexity and legal demands of employing folks.
Q: Finally, you advise staying flexible and create no blame. What do you mean?
A: Running your own business is not for everyone. If you don’t like it, or you find it too overwhelming, or it is more trouble and cost than it is worth, close the business. Eight out of 10 businesses fail in the first two years; of those remaining, another eight out of 10 fail by year five. To fail at your first business is not to fail as a person. If you liked running your business but it failed due to unanticipated market changes, or unexpected product competition, or some other factor, learn from what happened, assess the risks, and build your second new business. Life is long, and filled with opportunity.
Note: I’m proud to say I’m well-acquainted with Ms. Tamer’s credentials as we have worked together more than a decade in a professional association of consultants .
From the Coach’s Corner, here are more of Ms. Tamer’s insights:
10 Characteristics of a Successful CEO — This is a 10-part series on CEO leadership by Joey Tamer, www.JoeyTamer.com. She is a consultant to experienced consultants in all fields to maximize their practices. She has also been a strategic consultant to entrepreneurs in technology and digital media.
What No One Tells You about Raising Investment Capital — Tepid economy or not, investment capital is indeed available. That’s true during all economic cycles, according to leading consultant Joey Tamer.
What Should You Divulge When Asking for Investment Capital? — For many startups, it makes sense to grow organically. But for others, the answer is to seek capital by making the right presentation to investors. Here’s how.
The 6 Values for Your Financial Protection — Debt is the catalyst of all financial woes, says esteemed associate Joey Tamer. Here are her six values to avoid financial traps.
Funding Options to Navigate This Marketplace Bedlam — Uncertainties regarding Wall Street, actions by the Federal Reserve, and funding often set off alarm bells. But if you’re looking for capital, there are reasons to hope, according to leading consultant Joey Tamer.
“Logic will get you from A to B. Imagination will take you everywhere.”
– Albert Einstein