For those who don’t have any memory of computers in the early 80’s, my phone has about thousands of times more memory than the IBM. My phone also has a processor that is about 300 times faster than the IBM’s. In 1982 we never would have considered comparing our phone to our computers. Our phone hung on the wall, had a cord and a rotary dial, and nobody in my house ever considered the idea that it needed improvement.

Imagine someone coming to my parents’ house in 1982. This person asks us to consider the phone of the future. This phone is nothing like the phone on the wall – in fact, it is 300 times faster than the computer in the office and can store one million times the information. Not only that, it can go with you wherever you go.  “What would you do with that phone?” they might ask. Beyond placing and receiving phone calls we wouldn’t have had any idea, but I’d like to think we would have been excited.

And that’s why Google Fiber, or more specifically that’s why 1 Gigabit access to the Internet, is important.

On my first computer, I learned to write text-based choose your own adventure programs.

Choose 1 if you go in, Choose 2 if you stay out:

1 

You went in.

Why didn’t I do something cooler than this? Part of it was definitely a lack of talent, I admit. But the other factor was that the technology was limiting. The IBM had a monochrome screen and focused on text output. You could, with a lot of effort, use characters to make rudimentary images by arranging slashes and dashes in patterns but even if you created something like that, there wasn’t much you could do with it. So I created programs that would tell knock-knock jokes.

It wasn’t until my friend’s family got an IBM PCjr for Christmas in 1984 that we considered writing something more complicated. Why? The color screen. We decided it was time to program the game of Monopoly. Ultimately, we failed, but the color screen opened the door to new possibilities.

I will never forget the first time I saw the Internet. I was at BYU in my dad’s office and I didn’t understand it. Even though I didn’t know what I would do with a network of interconnected computers and the ability to build websites using hyperlinks, I knew that something interesting was happening. And then in 2003, I left the dot-com startup I had been a part of for four years to co-found my own company delivering web-based analytics solutions to large advertising agencies.

Computing power, the Internet, and reasonable bandwidth had made it easy to deliver software over the web instead of on floppy disks and CDs. We sold that company in 2007 but not before Greg Whisenant showed me the Google Maps API sometime in 2006.

The Google Maps API meant that anybody could publish a map. Greg had been publishing crime data for the DC Police Department for years, but it had never really taken off. I remember when he pulled me aside and asked if I thought his project would be better if the crime data was plotted on a map. I agreed that it would be much better and then together we built CrimeReports.com.

Perhaps if I were more innovative, I would be the type of person who imagines the world without limits. Visionaries see beyond the limits of our technology but most of us allow those barriers to inhibit our creativity.

We have reached a point where computing power is essentially limitless. I spoke to a young startup company today who built and deployed their application in the Amazon cloud. For all intents and purposes, they have access to an unlimited supply of computing power. They also have access to an unlimited supply of data storage. In the same way that my phone is hundreds and thousands times better than the computers I used as a kid, their computer infrastructure is hundreds and thousands times better (at a significantly lower cost) than the computers we used to build both of my technology startups in the last 10 years. The only technology barrier they will run into is bandwidth and if they are at all like me, bandwidth limitations are currently impeding their creativity.

So what will they do with a gig? I don’t have any idea, but I’m excited.

1. Give before you get.

I completely understand the desire to monetize every interaction you have with startups, but I think it weakens our community. As a struggling startup, I remember feeling very vulnerable and not knowing exactly how to get to the right people. And when we found people who had connections to the people we wanted to talk to, it was surprising how frequently those people wanted to be compensated for their advice or introductions. As I said, I understand why they would put a premium on their time, but I think it’s a really short-sighted model. Sure, you can get a fee from a struggling entrepreneur or a small equity stake in the business but you are contributing to an unhealthy system and if you are going to stick around that will affect you.

I know a lot of people who rightly put a premium on their time. I do too. But I believe that I will get a better return on my investment in the long run by giving instead of charging for my time, my advice, and my introductions. It is important to me to be part of the conversation. (I should clarify that I’m picky about introducing people to my network in order to keep an introduction meaningful.)

2. Mentors before money.

I hear all the time that the problem with the ecosystem in Utah is that there isn’t enough capital. I am convinced that this isn’t true. In fact, I’d be willing to pull out some good old economics to prove that it isn’t and can’t be true. Money will flow to where the best ideas and execution are found. And if you are following lean startup principles, money probably isn’t the roadblock to getting enough traction to find investors if you need them. So if money isn’t the problem, what is? I think that this is related to the first point, but we need to see more mentoring in the ecosystem. A healthy ecosystem should share information, collaborate, provide a mechanism for experience entrepreneurs to share what they have learned, and provide guidance to startups.

3. Don’t dismiss anyone.

This was the hardest thing for me to grasp, but I have come around to it. There will be people with bad intentions in every ecosystem and my instinct is to punish them. But the fact is, it doesn’t work and who am I to say who is allowed to participate and who isn’t? Things are rarely as black and white as they might appear to be at first. In the end, a healthy ecosystem will deal with bad actors on its own. If, for example, most people are practicing the give before you get mentality then the people who aren’t start to stand out. Eventually they change or they don’t have an audience.

Now What?

I mentioned in my last post that my company, Franchise Foundry, moved into the Startup Building in Provo and I briefly overviewed some of the plans we have for the building. The second floor of the building is currently under construction and we hope to have entrepreneurs in the space by May of this year. We and everyone we work with will be committed to following the principles listed above.

I’m also excited about what’s happening at the Startup Building. The building was named for the Startup Candy company (you can read about the company’s history here). The company has been through five generations of family ownership and is currently owned and operated by Jon Startup and they operate in the building next to ours. They have an impressive history. The plan for the building we occupy is impressive too. Franchise Foundry and The Innovation Network occupy the newly renovated lofts. The second floor will house Utah’s top technology accelerator, BoomStartup, in the summer and various young companies during the rest of the year. The second floor will also have a training room where we plan to offer content from various training programs. Some of this will be leadership focused, some of it will be technology focused, all of it will be great.

It’s exciting to be part of this project. I’m looking forward to seeing the transformation of the building and the block as we create a center for entrepreneurship and innovation in Utah County.

First the politics. It’s too bad that we take one sentence out of context and run with it. It’s too bad that instead of talking about how we can support entrepreneurship we are talking about this one line. Nothing constructive is going to come from this internet meme. But it’s easier than figuring out how to build a thriving economy. Talking about the real issues is hard and to most of us, it’s boring. The 24 hour news cycle has turned the news into entertainment. I’m not the first to point it out and I will admit that watching Fox News followed by MSNBC is one of my guilty pleasures. I hate to admit that there is a part of me that finds the whole thing very entertaining. Unfortunately, it never enlightens me.

And now on to entrepreneurship. Here is a link to what President Obama said in context — please read it (it will open in a new window). His summary point is this, “When we succeed, we succeed because of our individual initiative, but also because we do things together.” Do any of us actually disagree with that? Unfortunately, I think perhaps too many entrepreneurs do disagree.

I have supported my family through entrepreneurship for years. I love it. But how arrogant is it of me to ignore the people who worked alongside me? I have had success and failures and those successes and failures have been a result of my individual initiative, but also to a large degree because I was working with other people. Perhaps my risk was different, but so was my potential reward. The thing is that entrepreneurship doesn’t work in a vacuum. If you are doing it alone, you are doing it wrong.

I’m a Romney supporter. I plan on voting for him in the fall. But if he took off his political hat for a second and stopped looking at Obama’s statement as a gaffe that he could jump all over, I believe that he too would agree that he relied on others as he built Bain. I cannot think of a successful business that was built without any investors, without any employees, without any debtors, vendors, or customers.

I am indebted to people who have invested in my ideas and to business partners who have helped me. I’m indebted to customers who let me build my business on their dime. I’m indebted to employees who took risks they probably didn’t realize they were taking as employees of a startup. I am indebted to people who have loaned me money. I’m indebted to vendors who let me pay them when the business was able to pay them. I’m indebted to my wife who has been unbelievably supportive of me throughout the process. I did it, but I didn’t do it alone.

I would like to believe that most entrepreneurs feel the same way. We are rightfully proud of what we build. But only the truly arrogant think they did it alone.

1. What are your top 5 tips for incorporation for someone who is new to the process?

2. What would be your top 10 “need to knows” or advice before starting your own company?

I tried to answer the first question here. This post will answer the second question. Let’s see if I can make it to 10:

1. Get started. What’s stopping you? There are business ideas that will require a lot of capital and all of your attention. If you don’t have the time or money to do one of those, do something else. I kept my full time job when I started Sharp Analytics and I worked nights and weekends until I felt like I could make the switch. There are a lot of investors who will tell you not to do this. I understand why they say it, but in most cases I don’t agree.

2. Your idea is less important than your execution. I discuss ideas vs. execution in this post and my thoughts on the subject haven’t changed much. This is important if you want to start a new business because a lot of entrepreneurs spend too much time fine tuning the idea and not enough time executing. A good idea with great execution has more value than a great idea with crappy execution.

3. It’s hard to fly solo. I like having a partner. There are a lot of drawbacks to having a partner too — for one, you can’t just do whatever you want. But that’s the point. A good partner will hold you accountable and help you see holes in your reasoning. And there’s a lot of work to do. It’s nice to have someone share the load and make up for your weaknesses.

4. Sell early. There are at least two schools of thought on this. I subscribe to the idea that you need to sell early and often. Entrepreneurs, especially technology entrepreneurs, tend to wait too long to sell. If you are a technology entrepreneur, take advantage of the iterative development processes that have replaced traditional systems development. Your iterations should be short and inexpensive. Start selling as soon as you have a prototype and then use the iterative development process to deliver value to your customers. I read a book recently called “Nail It Then Scale It” recently. It was written by a couple of smart people but they advocate that entrepreneurs should “stop selling” and spend time interviewing potential customers. There are two problems with this. The first is that you should never stop selling, the second is that customers see things as they are, not as they could be. Innovation requires you to see things as they could be and then you have to sell that to your customers. The Innovator’s Dilemma addresses this quite well. Read it.

5. Make sure your spouse is on board. On more than one occasion, I have had entrepreneurs ask me what they should do if their spouse isn’t sold on the idea of entrepreneurship. I tell them not to do it. It’s not worth it. I’m not saying it isn’t worth trying to persuade your spouse, but it isn’t worth doing unless you have your spouse’s full support. Entrepreneurship is very rewarding, but it’s also a challenge that affects your whole family. I absolutely love being a business owner but it really isn’t for everyone and if things get rough (which they will) you will want the full support of your family.

I’m not sure I’m going to make it to 10 tips tonight, but that’s a start. Here are a couple of posts from the archive that might be useful:

1. A post on uncertainty: http://www.crappytogood.com/2011/06/uncertainty/

2. A post about the difference between a good entrepreneur and a crappy one: http://www.crappytogood.com/2009/05/the-yo-yo-entrepreneur/

1. What are your top 5 tips for incorporation for someone who is new to the process?

2. What would be your top 10 “need to knows” or advice before starting your own company?

Great questions. I’m not sure I have 5 tips about incorporation and 10 need to knows, but I’ll give it a shot. This post will answer the first question regarding incorporation.

Incorporation

There is a lot of good information on the web about the various types of entities available to you. Some of the specifics depend on the state you live in but the general principles of LLCs, S Corps, C Corps, etc. are similar in all 50 states. Each type of corporation has its advantages and its disadvantages and you could make a case for any of them. I think the most common mistake is to just start a business without creating the corporation (regardless of the corporation type). You can do this and you will be treated as either a sole proprietorship or a partnership (if you are partnering with someone). Without a corporation you have no good liability protection and generally very few tax advantages. Resist the temptation to get started without spending the money to create your corporation.

In general, I prefer the LLC structure because it’s simple and governed almost exclusively by your operating agreement. Profits and losses flow through to your personal tax return. I would probably choose an S Corporation (or create an LLC and opt to be taxed as an S Corporation) if I wanted to pay myself a wage and take distributions. And I would choose a C Corporation if I was seeking outside investment.

A couple things to keep in mind:

1. Generally, I would start simple and move to something more complex as the situation demands. You can start as an LLC, make an S election if you need to and later convert to a C corporation as your situation changes. You may lose some carry forward losses in a transition, but it’s usually not the end of the world.

2. You should really consult with an accountant or an attorney as you make this decision because your individual situation may vary. There are a lot of variables and you should be able to get the consulting and filing done for about $300 – $500. In the grand scheme of things, this is a relatively small price to pay for protection and potential tax advantages.

And again, whatever you decide, decide to incorporate if you want to build a business. And open a separate checking account, for heaven’s sake.

Phones

You have to have a phone and there is some great technology out there now to help you manage this. I would start with a Google Voice account. You can always move into a virtual PBX service like Jive (http://www.getjive.com). We use Jive at Franchise Foundry and its great. But I would start with a Google Voice account pointed to your cell phone. It’s simple and cheap.

Website

It used to be that websites were hard. Now they are easy and you should have one that doesn’t look like garbage. I would use GoDaddy.com to purchase your domain because they can also host the domain for you and they have one-click installations of WordPress. I currently host most of my sites at DreamHost (http://www.dreamhost.com) and I love it. They also support one-click installations of WordPress and I like their control panel. But if you aren’t sure of what you are doing, I think GoDaddy is the perfect solution. You can have a domain purchase and a basic site template up and running in under an hour.

Email, Calendar, File Sharing

I think the only real solution for a small business is Google Apps. Once you have your domain setup, you can create a Google Apps account (http://www.google.com/a) and verify that you own the domain. This give you a corporate email account, shared calendars, the ability to share files and to chat with your co-workers. You can have all of this setup inside of an hour, including the account creation.

Every team member should also have a Dropbox account (http://www.dropbox.com). It’s free for up to 2Gig and you can get more space by inviting others to join. Dropbox lets me easily access my files from anywhere. I like that I can share files, but the thing I like best is that I know I have a recent backup of everything I do (I have a Time Capsule backup as well, but there’s something nice about the simplicity of just storing my files in the cloud from the beginning).

Project Management, CRM

I’m a huge 37 Signals fan and I think every small business should have a Basecamp account for project management (http://www.basecamp.com). It’s dead simple project management. Make sure you create this after you have created your Google Apps account so you can setup your project teams with your corporate email accounts.

While you are at it, if you need to track a sales funnel, you should sign up for Highrise — a Customer Relationship Management (CRM) tool from the team at 37 Signals (http://www.highrisehq.com). It’s very slick. I had the chance to evaluate a new CRM called Stride (http://www.strideapp.com). Stride is probably the simplest CRM tool you will ever find and if you can support your sales process with Stride’s bare bones approach you absolutely should. I found it was lacking some key features that I have come to depend on in a good CRM, but that might be because I’m stuck in my ways. If simple works, do it.

Bonus Tech: Email Campaign Management

Not every business needs an email campaign management tool, but if you do I really love MailChimp (http://www.mailchimp.com). It’s easy to create and manage email lists and campaigns and the reports are useful. You can also use MailChimp to create a list by adding a list signup form to your site. MailChimp walks you through the entire process, making it easy for non-technical business owners.

Summary

Things have changed a lot since I put together the technology infrastructure for my first startup. It used to be that you had to purchase a server and buy licenses from Microsoft. You can get started with almost everything I listed above for free. Most of it will cost you a monthly fee once you get up and running, but you can scale into it. And you can stop paying for it when you stop using it.

If you have anything you would add (or remove) from this list, let me know. I’d like to keep this updated with additional information so that it can become a one-stop shop for getting the technology infrastructure for your business up and running so you can focus on generating revenue.

I think there is something to that. Of course there is risk involved with starting your own business, but there is risk in everything. Before Chuck and I started Sharp Analytics I had a good job that paid well. I didn’ really take a big risk when we started Sharp because I didn’t have to quit my job at first. I spent a few months of long nights and weekends trying to get things going at Sharp Analytics while I kept plugging away at my day job.

After a few months of working both jobs and saving everything I had made on the side, I was ready to leave the comfort of a steady job and try my hand at entrepreneurship with Chuck. I remember talking to my wife about whether or not I should quit. Her instinct was to say no but she made the mistake of telling me to call our friend Rick, a successful entrepreneur. She told me that if Rick thought it was a good idea then I could quit.

I’ll never forget that call. We only talked for a few minutes and Rick didn’t really ask me any questions about the business. All he needed to know was that I was going to do something on my own. I remember he asked me what the worst-case scenario was and he asked if I would be able to get a job doing more or less what I was doing now if the business were to fail. When I said that I thought I probably could get a job he said, “Then you are asking the wrong person. I would tell anybody to quit working for someone else and start a business.”

At the time, I thought I was taking a risk. But the truth is that it wasn’t much of a risk. And the risk that did exist was calculated and mitigated. Calculated because I knew what the worst-case scenario was and it wasn’t that bad. Mitigated because I had some personal savings and because the job market was pretty strong at the time. So in hindsight, I don’t think I took much of a risk at all. I did, however, leave the certainty of a regular paycheck and steady work, the certainty of a job description and knowing who reported to me and who I reported to. I had MS Project telling me what to do most days. I had a lot of certainty. I gave that up for a lot of uncertainty.

And though startups tend to focus on cash (or the lack of it), the uncertainty we faced was more than just the uncertainty of a paycheck. Chuck and I did not know what we were doing. I need to track down our business plan from those days and compare it to what we actually did because I’m sure it would be very entertaining. We ended up landing a client that was huge for us and we were scared to death. We hoped we could do what we promised but we didn’t know how we were going to accomplish it. That’s material for another post, but let me say that I nearly had a nervous breakdown but we ultimately delivered what we promised a little later than we’d hoped. It was a miracle.

The truth is that we iterated through strategies until something finally clicked and it clicked just in time. And all along the way, we dealt with uncertainty on issues as core as “What do we do?” to “What do I do?” to “How do we work together?” and we got really good at being comfortable with the uncertainty and figuring out how to make it all work.

Image via Wikipedia

I also like the fact that the poster isn’t exactly optimistic. Imagine how ineffective the posters would have been if Churchill had instead decided to go with, “When life gives you lemons, make lemonade!” Everybody hates a pessimist, but a starry-eyed optimist is often equally unwelcome when things are in the toilet. Neither the pessimist nor the optimist is doing something productive. The pessimist decides that nothing can be done and the optimist decides that nothing needs to be done. An effective operator decides to keep calm and carry on.

Recently we had a client whose agreement was set to expire within a few months. The original agreement had some performance benchmarks that we had to hit or we would be faced with significant penalties – penalties that would have caused problems for our company and would have strained our relationship with our client. At that point, we were well below the benchmark and achieving it seemed impossible.

I remember the meeting very clearly. I had pulled the team together to review where we were and what we needed to do to meet our commitments. It was tempting to take the pessimistic view that we couldn’t hit our goals and therefore we needed to begin preemptive damage control. There was some temptation to take the optimist route and just hope for the best, but nobody on our team was willing to fall into that trap. Instead, we laid out the specific things that had to happen to meet our commitment. The list was daunting because it would require us to perform at a higher level than we had ever performed at before. We had a lot of ground to make up.

But we didn’t just stop at listing what we needed to do, we got specific. We went as far as naming specific deals that we needed to close in order to make our commitment. We also recognized that we didn’t have control of every aspect of the process. Our success depended on convincing third parties to make significant commitments. It was inevitable that we would not have a 100% close rate, so we identified multiple paths to achieve our plan. Ultimately, we identified three paths and we assigned owners for each path. And I wouldn’t be writing this down if we hadn’t succeeded.

I don’t get much accomplished in a state of panic, so the reminder to keep calm and carry on is one that’s worth hanging on my wall.

This question is one of the harder questions for a small business owner to answer because it’s quite likely that your small business isn’t the best at anything (yet). Answering the question is also complicated by the fact that even if you are the best at something, it’s hard to determine how narrowly to define what you are the best at.

I remember having this discussion at Sharp Analytics — what were we the very best at? Was it marketing dashboards or was it more narrow than that? Maybe we were the best at marketing dashboards for advertising agencies. Or maybe it was even more narrow – perhaps we were the very best at marketing data source integration for international advertising agencies. Or was it more broad? We knew that we weren’t the best at the larger category of business intelligence, but we had some thoughts about business intelligence that we felt could change the industry. If we defined ourselves too narrowly, would we miss the big opportunity? Answering the question would define our strategy. We would either be helped by the laser focus or we would choose the wrong “hedgehog” and get stuck doing something we weren’t the best at — a recipe for disaster.

I am of the opinion that if you are in the Crappy to Good stage of your business, you might not have a hedgehog. A startup should be a little bit more like the fox. Let’s look at the fox for a minute. The fox isn’t the best at anything yet (at least in our example) but he is cunning and willing to learn from his mistakes. I’d like to believe that at some point, the fox gets it right. He figures out that if he can get to the hedgehog before the hedgehog rolls into a ball, the fox can flip him over and win. Maybe the fox needs to take a lesson from the badger who knows how to pry open the rolled up hedgehog and eat him.

The worst thing a startup can do is define what it does so narrowly that it misses the big opportunity. It’s critical to have a strategy and a plan backed by a well thought out financial model but you have to recognize when you were wrong and learn from mistakes. In a startup, I value agility over focus until you find out what you really are the very best at. In the early stages there is clearly a balance and you have to be careful not to be so unfocused that you are out of control but again, the fox is probably a good example. The fox is going to turn over that hedgehog but he doesn’t know exactly how he is going to do it. So every day, he puts a plan of attack together and tries a different tactic. He’s still focused on the hedgehog and committed to eating it, but he’s agile and willing to change strategies to meet his long-term objective.