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Thursday, August 14 - 11:42pmSanction this postReply
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Hi everyone, I've been wondering what the minimum required knowledge is to start a business. Many people start a business without having gone to business school. They are just people interested in some technology or some kind of work and decide to go out on their own. I've wondered how they can succeed if they don't know what they are doing. However, I heard from 'captain capitalism' that business is 95% common sense. And from other sources, I've heard the main reason people fail at business is due to evasion (ie. irrationality). I guess once you get going you hire out the specific jobs like accountant, marketing managers, and even CEOs? But how do you ensure that the people you hire know their stuff? What do you need to know at a minimum to have your business run smoothly? Anyone have any book recommendations? I may one day want to go out on my own and start a business, and I'd like to have some minimum knowledge such that I don't make silly mistake.



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Friday, August 15 - 3:06pmSanction this postReply
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Here are the recommendations that come to my mind:

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Find a mentor... maybe someone who retired from a succesful business of the kind you end up contemplating.  I would hope you can find a mentor who lends you his perspective and advice for free, or an occasional dinner.

 

Call in consultants at different times to get their high levels of expertise in specific areas, like marketing, manufacturing, distribution, etc. For the consultants the trick is two-fold: finding good consultants (as opposed to those who are too blinded by their expertise too see the larger picture, and as opposed to bullshit artists whose advice could give more trouble than benefit), and balancing the cost of the consulting against the benefits derived.

 

I've seen lots of new businesses fail by trying to emulate the structures of larger businesses.  They want an HR department, a Marketing department, etc.  Don't start subdividing and getting formal, functional divisions till you are forced to do by the growth of the sales.  No matter how much you love a particular idea, if you don't make money, it isn't sustainable - so stay focused on what brings in money and how to avoid money going out.

 

Find sources of funding that are non-recourse, and not money of your own that you can't afford to lose.  Assume you might fail a number of times before you learn how to make a business work.

 

I'd work for someone else in a business like the one you want to start before you start your own so you can see what it looks like from the inside.  The complexity of interactions between different technologies and business service providers has evolved into very complex  web - not at all like just 30 or 40 years ago.

 

The way you know if you've hired the right people is first, by getting good at reading resumes and asking questions (e.g., "I don't see anything listed between 2010 and 2012, what were you doing then?"  Or, "I'm seeing a pattern of your not being with a company for longer than 2 years - whats going on with that?"  Or, "When you were the manager in that department, did you have make the budget?  Did you do the hiring?" etc.) and checking references, and reading body language for evasion and... practice.  Then, and this is more important, having metrics of some sort that let you judge their performance after they are working for you.  Ask your mentor, or talk briefly with the right consultant to learn how to measure the performance in a given position.  If you have the right people you don't need to micromanage.  If you have to micromanage you don't have the right people.  Let someone go early if they aren't working out.  You need to work with a lawyer to set things up in the litigous society to ensure that any interactions with anyone, employee or other business or customer doesn't result in a lawsuit that takes away your life savings (limit your liability).

 

Expect to make very sub-standard decisions, but be open to learning, and then making corrections.  Persistence is a greater predictor of success than anything else.  Try to make substantial margins for errors in your decisions (things will cost more, take longer, be more complicated, etc., than you think.  So be careful around any estimates that if they are wrong could hurt you.)  Estimate everything you can up front, make a note, then compare how you did with hindsight - great way to get better at estimating.

 

Work mostly with a process where you expect to pursue a simple model that accounts for the primary business functions, and then add, correct and tweak the process while trying to stay focused on what will make for sustainable success.

 

Talk to an accountant before you actually start and explain your plan - get him to draw on his experience in doing the books for similar businesses to give you proforma profit/loss statements.  You need to know what your monthly nut will be, and the expected returns so you can measure your progress.

 

If you fall in love with the idea of the product or the service you'll be offering, you risk not seeing if there is a solid market for it, or if the cost to reach the market will kill the potential for profit.  Nothing wrong with the passion, just know that it can't involve putting on blinders.

 

Ask yourself how you will get people to be your customers - specifically, how will they find out about you, what will it cost you to get your message out there.  Do that before you start spending the money to get a product.

 

Good luck.



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Tuesday, August 19 - 2:23amSanction this postReply
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you might find the book, Growing a Business, by Paul Hawken, to be of value.....



Post 3

Tuesday, August 19 - 6:02amSanction this postReply
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Check your local community college for certificate programs like this one and get totally serious about understanding accounting, the language of business.

 

Without positive long range cash flow, the business implodes.

 

Note that sites like Pass Your Class can let you self-study and earn equivalent college credit without the hassle of classes.

 

QuickBooks is an excellent accounting program but consider Quicken Home and Business first if you intend to start small.

 

If you do not currently manage your personal finances using Quicken, get on top of that first.

 

See Experiencing Objectivism through Quicken for more.

 

(Edited by Luke Setzer on 8/19, 7:44am)



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