Lessons from a lawyer on how to avoid the start-up bust up and in turn avoid spending your savings and sanity on cleaning up the mess.
I am a lawyer.
Yes, that’s the worst thing about me (I think)… So let’s move on.
I am fortunate enough to be in a profession where I get to see many starts up flourish, but I also see just as many crumble. So what lessons can I pass on? Here are my 10 tips to avoiding startup complications.
1. Have balls
If you aren’t sure why you are doing something, don’t do it. Having your own business means making hard decisions fast. It means weighing up all the risks and rolling the dice. The most successful start-ups I have seen quickly learn all of their risk factors whether it be consumer, regulatory or competition and come up with a strategy to forge ahead regardless. Educated gambling takes balls. If you want to wait to ask mum then being a market leader probably isn’t for you.
2. Don’t be afraid of crazy ideas
When I ask my clients what their business idea is, I sometimes struggle to keep a straight face. I remember a couple of young guys whose whole business centred on flatulence. I thought surely not? Those clients crazy enough to think “if I reckon it’s a good idea, others will too” laugh all the way to the bank and the doubters, well they end up looking the fool. And me, well I’m still here at my desk, whilst they’re on a beach somewhere living the dream.
3. Have the difficult conversations
He might be the world’s best wingman, but when he won’t get out of bed on Monday morning the fun ends pretty quick. Whenever I hear a client say things like “I don’t really trust him” or “he isn’t pulling his weight” alarm bells ring. A good start up partnership will have the difficult discussions early on. What is expected of each person? What will each person get? And most importantly, what happens when someone doesn’t pull their weight or just plain does something stupid? Trust me, stupid happens more often than you would think.
4. Put it in writing
Which leads to the next point. Put everything in writing. I have lost count of the number of times I have heard people say that they have agreed to something but conveniently one party has changed their mind, and no surprise, it’s usually about money. Doing business by handshakes and on word is a sure fire way of creating tension and distrust. Save the arguments about whose recollection is correct by having everything in writing. If you can’t remember what a pen and paper looks like, email exchanges will do. Leave Twitter out of it.
5. Plan your Advice
You may have created a full proof timeframe for getting your product to market, but you forgot one thing – lawyers, accountants, developers and others may not work to your timetable or may charge you extra for the “urgency”. Avoid frustrating delays and cost blow outs by ensuring that you have the right external team on board from the beginning who can help you plan what you need within a timeframe that works for you. Understand what will be involved, the process and where delays may occur. Be on the front foot. Don’t miss the market because you haven’t given others enough time to do their job.
6. Budget for Professional Advice
The old adage you have to spend money to make money couldn’t be truer. I know right… A lawyer telling you to spend money! But this is different, my advice here is spend a little now and save a lot later on. If you think lawyers are expensive drafting agreements, just wait until you see how much they will charge to dig you out of the hole you got yourself into!
You don’t need to spend a fortune early on, just enough to know your risks, protect yourself where possible and get off the ground. Be smart.
7. Don’t Cut Corners
Yes, there probably is a quicker way of doing things, a cheaper way, hell with the internet you can probably just copy someone else right? Wrong. Have patience. You know the saying “if you aren’t going to do it right, don’t do it at all!” Hold that true. You cannot build an empire on quicksand and copying your competitor is cheap. Sure, you don’t need to reinvent the wheel, but at least design the wheel the way you want it. It might squeak less that way.
8. Build a Team
If you are going to take on staff, make sure you know what your obligations are. From the minute you take on someone you are exposed to OHS issues, WorkCover requirements, superannuation and PAYG. Know your obligations up front. Is there a better model to work under? Have you thought about consultants or contractors? What about virtual assistants?
And I cannot stress this enough, protect your intellectual property from your staff and in turn from your competitors. Do you know what the the KFC secret herbs and spices are or the recipe for Coke? No? That’s because those companies have done this one little thing right for a very very long time.
9. Plan your Exit
From the moment you enter business you should know your exit plan. It might seem a funny way of thinking but it will shape every single decision you make on a daily basis. Getting out is your goal, getting out with money in your pocket is the dream.
There is no shame in trying and failing. If the business isn’t working, and you have given it your all, then walk away. Do not throw good money after bad to prove a point or save your ego. Hold your head up high and move on to the next opportunity. The biggest disputes and the biggest losses are suffered when people are too stubborn to move on. Don’t be “that guy”!
10. War Stories
Did things go wrong? Great, tell everyone who will listen because I bet they have just as many war stories to share with you. And guess what, you will learn from, or at least laugh at, each and every one of those lessons. If you don’t have any war stories yet, brace yourself, winter is coming.