Nuggets of Advice for Small Business Owners

Sometimes I feel very alone in the road I'm walking with Rich in this business. We don't take investor money. We already have a successful product, actually-- we have some big names signed for Basis deals. But we're not quite rolling in money yet, so we still do occasional contracts to pay the bills in between deals. We believe in giving back to community. We aren't going to hire anyone, just short occasional junior coder contracts to help disadvantaged people break into the industry. We don't sell to the mass market, we sell to other businesses, often just going straight through engineers.

I know a lot of engineers, a lot of startup founders that are going the investment route, and a lot of individual freelance coders not making a product. But not many doing quite what we are.

So meeting up with Geoffery today was an insightful, invigorating breadth of fresh air. He has walked a very similar path to the one we are walking, and knows many others who had. Seeing someone else who has succeeded was just the rush of positivity I needed today.

He also had some valuable business advice that is worth passing on.

Background

Geoffery started a video tutorial company. He did not take investor money. He was making $15K/month within the first month of trying it, so he almost immediately ditched his other work to pursue it full time. After 7 years of successfully supporting himself and his small team, he got a bunch of acquision offers and accepted one-- the money was good enough to make it well worth it, and he shared that with his team too.

Understand People

Going into business with others and negotiating deals with others can involve a lot of trust.

The example he gave me involved a construction company doing work on his house. It was a huge contract for them, but they turned it down because they weren't sure they could do good work, they just weren't experienced in that kind of construction.

But many times, we can't quite rely on people to tell us exactly how they're feeling, what they're capable of, what's at stake, and so on.

It's important to be very aware that there's always a lot you don't know about people, and to be keenly aware of power dynamics and how that affects relationships.

Negotiation

Always wait to name a number-- partially because of the last point! There is so much you don't know about a person and company going into a deal, and it's difficult to just name a price without that knowledge. Take your time getting a good feel for someone before talking about money.

Also, always be willing to walk away if you can. The ability to walk away from a deal is a crucial part of negotiating well. Set up backup plans, make sure you'll be okay without the deal going through. Be well aware of your bare minimum expectations, and what could make you walk away.

And remember, you can always go back on a "no." Many times you'll say no to something that didn't make sense at the time, but makes sense months from now. Keep in touch with people, stay on good terms, and know that you're not really closing the door permanently with a "no."

Bootstrapping

The process of supporting yourself as an entreprenuer without investor money is commonly called "bootstrapping." For Rich and I, that means occasionally taking contracts and signing pre-order deals or deals to develop specific features people want in the compressor.

This works.

As a small business owner, simply hearing that other people are very successful doing this makes me very happy, so I'm passing on the good vibes. I think being a software developer capable of doing contract work makes it even easier.

Be very wary of investors. What's strange is that I've talked to prominent investors, and they all tell me not to take investor money too at this point in our business! You give up control and have to answer to someone else and lose your profits. Just keep this in mind as you go forward.

Acquisitions

Be careful about acquisitions. They typically take 3-12 months to negotiate. You likely won't be as happy working for the new company, but you'll stay for a bit and help things grow and make enough money to be able to relax and then start a new happy journey after not too long.

This is important: you can't put a concrete value on your company. Don't get tricked by people using official-sounding equations to calculate how much you're worth. Especially if you're in early stages, especially if you have intellectual property, no one can know. 7 or 8 figure deals are very common in small companies. But it all comes down to typical negotiation issues: how much is the company willing to pay, how much are you willing to take to give up that control.

And wait, if you can. Grow the company so you get a good feel for how much it may actually be worth.

Lastly, be careful about how much time you spend negotiating acquision deals. It can take a lot of work, and it doesn't always go through, even after months of negotiating.

In the end, you will be happier owning the company, but sometimes the money makes it well worth it and paves the way for even better adventures.

Structuring your company

Geoffery had an S-Corp, we have an LLC taxed as an S-Corp. But it doesn't matter too much, a lot of small business owners are surprisingly sloppy about this and it works out in the end. In IP, this includes getting your patents pending though which can be important! Seek some advice from an accountant and lawyer, clean up your bank accounts and records and get payroll properly set up if you can-- it just makes things easier.

Be kind, create community

This point is really simple. Being kind and helping people out and having real friends goes far in so many ways, and I learn this more every day myself. And isn't that what life's about, anyway?

A lot of my business deals have started with something I just did because I wanted to be nice or help people out, and then we became friends. And it's nice to hear others confirm that this kind of good karma works for them too.

And having a support network of people doing similar ventures is absolutely invaluable.

Having a good mindset is a huge part of success.

Hopefully these nuggets of advice help fellow small business owners feel less alone and more guided, too.

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