Blogging last week, I wrote about bootstrapping and where start-up companies should scrimp. I was making the point that the costs of starting a business are far less than many assume and much of the propaganda (trying to warn off the dreamers perhaps) states.
Yet there are also things not to scrimp on. Bootstrapping doesn’t mean “winging it” or cutting corners on vital requirements. Start-up businesses are also vulnerable businesses, and too many are exposed – perhaps to larger rivals or even the overly punitive employment laws.
Bootstrappers should know where to save money, of course. But they should also know where to spend it. Hopefully, some helpful suggestions below:
Accountants. A good accountant will save any small business a great deal of money. Tax, like death, is an inevitable feature of life but any entity should only ever pay its legal minimum. We should let the inefficient entities subsidise the efficient ones by investing in a decent accountant that can navigate the Byzantine world of any country’s tax structure. Moorgate’s accountant charges around 0.5 percent of the company’s turnover, and saves it around 5 percent (not just from tax efficiency). That’s a pretty good ratio in my opinion.
Compliance. Insurance, health & safety, anti-discrimination legislation, benefits etc etc. Like taxes, regulations are inevitable and seem to grow year-on-year (perhaps because politicians need to justify their existence). As with our financial phobia, compliance is also a classic area for those with fear of failure to neglect – leaving us potentially exposed, or – more likely – deterred from starting our own business. The solution is to treat it like a project – setting time aside to get to grips with the issues. Either that or we should hire someone to do it for us. Some small business accountants (including mine) can also act as outsourcing compliance officers, making sure the regulatory burden is met.
Presentations. These are the modern shop window for most companies – especially service providers – and it’s worth investing in pitch presentations that compete with the big boys in terms of image and message.
In Life’s a Pitch (2007), design and advertising consultants Stephen Bayley and Roger Mavity point out that the pitch is when you are asking someone to judge your future, which makes pitch documents worth investing in.
“The pitch moment, those crucial moments which give the opportunity for big change, all have one thing in common,” write Bayley and Mavity. “You are trying to get someone else to do what you want them to do – to hire you, to sleep with you, to lend you a million pounds to start your business…A pitch does not take place in the library of the mind, it takes place in the theatre of the heart.”
Or as Bud Fox (Charlie Sheen) said just before pitching Gordon Gecko (Michael Douglas) in the all-time business classic Wall Street (1987): “If life all comes down to a few moments. This is one of them.”
So make it a good one. There are 100s of freelance designers out there, many willing to work cheaply to build up their portfolios. Find one and use them to produce a tip-top presentation, although make sure it is a template that can be self-updated as freelance designers tend to have disappeared by the time they are next needed.
Same goes for branding – ask the freelancer to come up with a decent logo. Anything we do ourselves will be awful, no matter how good we think it is.
Get on the plane/train. It may seem obvious that clients/customers are impossible to win without first meeting them but this is an area where many bootstrapping entrepreneurs fall down. Interest from a client in another city or country will never be firmed up by email or phone. It requires a meeting, and that requires us to make the effort to see that person at their place of work, no matter where it is. So get on the plane and visit prospective clients, although always travel cattle-class. And if an overnight is unavoidable, source other potential meetings in the same city.
Sales. Never ever let go of sales and never scrimp on the sales effort – lunches, visits, presentations, whatever. And that usually means that the role of head salesperson remains with us, the company’s founder and owner. I'm often approached by “pearlfinder” type organisations on a regular basis that promise to set me up with meetings with prospective clients. I always make the same statement – I’ve researched my potential client base down to the 50 or so accounts I must have. With this done, I just keep banging on their door until I’m let in. The individuals may change, I may get passed from office to office, but that’s fine – the more people that know me inside the building the better. But I never delegate that role or buy in sales on a commission. Selling is my job.
Legals. Lawyers, like politicians, seem to like making work for themselves. And who can blame them given what they can charge? However, they are also a necessary evil and – at times – cannot be avoided. I learnt my lesson after having a PR agency attempt to poach a team-member despite them signing my self-written non-disclosure agreement that included a clause about not coming after my staff. Assuming I had a case for compensation, I went to a lawyer who said it was not worth the paper it was written on (and kindly didn’t charge me for the advice). Anything someone has to sign should, therefore, be seen by a lawyer (at least in template). That includes NDAs, contracts, staff dispute resolutions, confidentiality memos – the lot.
As a High-FF (someone with a high fear of failure), I absolutely hate handing money over to a lawyer. It feels like booking a yacht on the same basis as a metered taxi except I cannot see the meter. The answer? Like finding a good dentist, find a lawyer you like and stick with them – building up a relationship. And always ask for a quote beforehand – every time (by email at least). At that point they are bidding for the work, so they’ll pitch it lower than after you’ve engaged them. And I complain like hell if I feel stung. Lawyers hate complaints, which means they usually collapse when challenged on their charges (and they are some of life’s most accomplished horse traders, so don't be too afraid to ask).
Until he retired, I used a country solicitor from the Midlands – a friend of the father of my ex-girlfriend. He was an Aston Villa season ticket holder and we bonded over some great football chats at my not-quite-father-in-law’s rugby club. He was also as good as any London lawyer, far more trustworthy and a fraction of the price.
People. Moorgate’s juniors start on a better rate than the competition and have their salary raised more often. This means I get good employees that can absorb heaps of responsibility. Of course, we struggle to compete at the higher level so offer equity for long service. And that's genuine equity - not a smoke-and-mirrors profit share scheme that so many equity option-schemes turn out to be on closer inspection. So we may not have a Christmas trip to Paris or a bar on the roof for after work drinks, but employees are paid a good rate, move along faster, do more meaningful work and become a part-owner of the company – so who cares about the tired office block and scuffed desks?
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