The Non-Fun Hard Parts
"Laugh and the world laughs with you. Take out the garbage, and you walk alone"
- The Wizard
I got an email from a would be entrepreneur asking if there were people or companies you could use to handle the "painful and non business related" parts of starting the company so that this person could focus on the business and product.
There are certainly companies to which you can outsource aspects of company creation cheaply and productively, and particularly if you're a very small one or two person operation that's bootstrapping things, these kinds of services can be very useful. My worry about the email, however, was with the belief that the non-product specific tasks of company formation were "non business related". In reality, the first months/year of the business are about the highest percentage of working on the product you'll get. If you're already thinking there's too much "non fun stuff" involved in starting a company, you might want to consider a) multiple co-founders so you can be product guy and somebody else can run the company or b) not starting a company.
The other benefits to tackling a lot of these non-product pieces of company creation yourself is that you might find it interesting, helpful, and even important down the road to understand the details behind things like why you'd choose an LLC over an S-Corp, what the details of your office lease tell you, why phone systems are so damned expensive, etc. Finally, even if you do bring somebody else in to handle all these "details", if you adopt a posture early on that you don't like to get your hands dirty, I predict trouble down the road including but not limited to general pain and suffering with periods of poverty, acrimony, and finger pointing. It's fine to move into a product specific role when there are more people in the company, but in the early days you're going to have to take out the garbage a lot, and nobody's going to want to hear you talk about how great it was that you just took out the garbage.
Comments
It's my belief that when you're starting out, the head guy has to handle all the details - especially if it's the founder's first time venture.
For example, if you don't know what a pain in the ass payroll can be, than you don't know the value of a decent payroll service.
BTW, we've started using EmpowerHR.com as our outsourced HR group and it's making my life a lot easier.
Posted by: Rick | February 23, 2007 12:25 PM
I couldn't agree more with your suggestions. The small, ugly aspects of starting a company are not fun, or exciting, but absolutely necessary. Adding a cofounder or two has been the smartest thing my partner and I decided to do. We could have started separately (and become competitors), but instead we play off of others strengths and assist with each others weaknesses or shortcomings we also pick up each others slack when we are drained from some of the things the guy above would probably like to outsource.
Posted by: Zach Katkin | February 25, 2007 07:11 PM
Great post Dick -- I've dealt with people in the past who "hate this legal stuff" so much they refuse to read through documents and contracts....you've got to focus on it, get them done, and put them behind you I think if you're going to run a startup. The other problem of refusing to engage in these non-fun activities is that if you don't understand your own documents you will be in 0 position to negotiate anything moving forward, whether it is a new financing, a partnership, etc. You need to understand this stuff if you're going to run a business. Your investors will certainly expect you to.
Posted by: AlFromChicago | February 26, 2007 12:00 PM
There is an implication in:
that you should choose an LLC over an S Corp. For a corporation based in CA, with all of the stockholders/owners in CA, this costs more on an after tax basis (in particular the CA tax treatment of LLC's is much more unfavorable than sub-S) and is more difficult to convert to a C corp if you choose to raise outside funds.Posted by: Sean Murphy | March 2, 2007 12:16 AM
Hi Sean, good catch, I didn’t mean to imply that. Certainly, there are instances in which an LLC is preferable to an S-Corp and other cases in which an S-Corp is preferable to an LLC as you highlight in your comment. I was only trying to point out that it’s important for founders to be involved in these decisions even if they’re not relevant to the product or service, and I’m afraid I was a bit casual in my examples.
Posted by: Dick Costolo | March 2, 2007 06:53 PM