Part of the this process also involves developing a “minimum viable product” that will please some customers, and then build the business from there, responding and reacting rapidly to market responses to product changes.

Below is a great slideshow that illustrates the process.

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I read an interesting post on Gigaom.com this morning titled “The 10 Ways Startup Advice is Flawed.”  It focuses on advice given by people perceived as successful start-up entrepreneurs – attacking the premise that someones status (i.e. wealth, fame…etc) may not necessarily be related to what they did as a start-up – and that therefore their advice is not sound.  Here is a key excerpt from the post.You can read the whole post here.

1. Maybe the thing they did really didn’t cause them to get rich. A lot of startup stories are after-the-fact rationalizations or outright myths. As they say in Latin (and on the “West Wing”):Post hoc ergo propter hoc. In other words, just because something takes place after something else, doesn’t mean the two have a causal relationship.

2. Maybe they got lucky. After all, as my grandmother used to say, “Even a blind pig eventually finds a truffle.”

3. Maybe they did the thing they said and it was actually a bad idea, but they were in the right place at the right time. A lot of powerful businesses (especially network-effects businesses) are largely resilient to incompetence.

4. Maybe the thing they did worked, but only in conjunction with some other unnamed factor. For example, many visionaries partner with a heads-down, practical type.

5. Maybe the thing they did worked, but it only under certain circumstances. For example, perhaps it worked in their industry and not in yours, or only in certain phases of growth, or for certain kinds of teams.

6. Maybe the thing they did used to work, but it doesn’t anymore. For example, perhaps competitors now know how to counter such a move.

7. Maybe the thing they did worked, but for a different reason than they think. For example, perhaps it was the feedback of their customers, not their grand original idea, that was key to success.

8. Maybe they didn’t really do the thing they said they did. Most of the mythological startup stories are highly misleading. Many of us remember the past the way we wish it had been rather than the way it actually was.

9. Maybe they’re not really rich and/or famous. A lot of startup energy goes into what I call “success theater” –- that is, convincing the world that you and your startup is successful. Next time you’re listening to a guru, ask yourself: How do I really know that they’re successful? What is their definition of success? What’s mine?

10. Maybe they have an agenda. Ask yourself: Does this person stand to benefit if I follow this advice? The VCs I know and trust are honest and very pro-entrepreneur, but I routinely hear others give advice that entrepreneurs should be suspicious of. Fundamentally, their incentives are based on having a portfolio of startups. As an entrepreneur, you have a portfolio of one. Think about that the next time a VC advises you to swing for the fences.

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• privately held
• have a software-based product or service at the core of their current or future business
• be in business for less than three years
• earn less than $1 million in annual revenue.

The entire press release follows:

Bloomington, Ind. — The Bloomington Technology Partnership announced today that they have joined BizSpark, an international program that provides software technology startup companies with three years of free Microsoft software.

“We are very excited to help bring cost savings to our local start up business community,” said Jeremy Sowders, Vice President of Business Development for the Bloomington Economic Development Corporation (BEDC) which manages the Bloomington Technology Partnership. “The BizSpark program by Microsoft is an innovative way to help companies during the critical early stages of development and for that reason we wanted to help make this resource available in Bloomington.”

The Bloomington Technology Partnership worked closely with the Indiana University Research & Technology Corporation (IURTC) to bring the BizSpark program to the Bloomington area. “The Microsoft BizSpark program fits right into our mission of helping fledgling start up ventures successfully transition into profitable entities.” added Tony Armstrong, President & CEO of the IURTC. “By sponsoring this program the Bloomington Technology Partnership strengthens the position of both the Bloomington area and Indiana University-Bloomington in today’s ultra competitive start up business environment.”

Microsoft programs available through BizSpark include Microsoft Windows Server, Microsoft Office SharePoint Portal Server, Visual Studio, SQL Server and more. To be eligible for the BizSpark program, startup companies must be privately held, have a software-based product or service at the core of their current or future business, be in business for less than three years, and earn less than $1 million in annual revenue. A company may take part in the program for up to three years unless it goes public or is acquired by another company. There are no initial fees to join the program, but $100 is due from the company when it exits the program.

Companies can solicit the Bloomington Technology Partnership to be their BizSpark sponsor by visiting the program’s web page at http://www.microsoft.com/bizspark/ and entering the section labeled “Startups.” After selecting the proper region, click on the Bloomington Technology Partnership as the sponsor organization.

About Bloomington Technology Partnership

The Bloomington Technology Partnership fosters the growth of Bloomington’s emerging high-tech economy. A public-private partnership established in 2008, it draws on the “best and brightest” to meet the needs of high-tech companies and their employees.

The Bloomington Technology Partnership is a program of the BEDC, a not-for-profit corporation funded through memberships from private industry, City of Bloomington, Monroe County, Indiana University and Ivy Tech Community College-Bloomington. The Bloomington Technology Partnership is funded in part by the City of Bloomington. For more information go to www.bloomingtontech.com

Source: Bloomington Economic Development Corp.

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Pain.   Anyone who has ever had a surgical procedure knows that after the procedure there is lots of postoperative pain.  Medical care facilities have historically relied on the administration of narcotics to treat post-surgical pain, which sometimes includes side effects such as grogginess and nausea.  Enter Symbios.

Symbios is a medical device company that designs, manufactures, markets and sells pain management solution; Symbios’ current products, commonly known as disposable pain pumps, deliver post-operative anesthetic pain medication (non-narcotic) to surgical sites, which according to Symbios is an economically an clinically superior way to treat pain management. Its products are used routinely on a daily basis by more than 65 medical care facilities (a number that is growing fast) as a post operative pain management solution for a wide variety of clinical procedures.

According to Symbios, a $3.2 billion opportunity exists in the acute care market for incisional surgeries and continuous peripheral nerve blocks. Published studies indicate that less than ten percent of this $3.2 billion market is currently using disposable pain pumps. The balance of the market is either still prescribing systemic narcotics or is unaware of the relatively new development and advantages of pain pumps for post-surgical pain management. Because of this, Symbios President Herb Senft is excited about the company’s potential:

Symbios is at an exciting point in its evolution. Our market is huge, and is growing 25% or more annually. We have a very competitive product with features that our customers really like and prefer. With national coverage through a series of independent distributors, our products are being introduced to hospitals nationwide. And we have an exciting new product in development that is already catching the attention of several large industry players

A solid product – and a huge and relatively untapped market – make Symbios an Indianapolis start-up to watch!

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As a rule of thumb, I typically tell clients they need to form a legal entity separate from themselves anytime (1) there is more than one founder or (2) the business is about to engage ANY sort of third party for ANYTHING.  The first point is obviously based on the need to put down pre-incorporation/organization agreement in writing (i.e. avoid arguments and conflicts among founders), the second based on the need to shield potential liability.

I came across an excellent posting on this topic by Yoichiro (”Yokum”) Taku, a west coast attorney who maintains StartupCompanyLawyer.com.  He has some points that expand nicely upon my second rule of thumb above, some of which I have included below:

Funding.  Obviously, if third party investors want to invest in a startup idea, there needs to be an entity to accept the investment.  Generally, I prefer to incorporate and issue founder’s stock at nominal prices well in advance of a Series A preferred stock financing because it is difficult to justify that common stock should be priced at $0.001 per share while Series A preferred stock is issued at $1.00 per share.

Launching a service/product and general liability issues.  One important reason for incorporating a company is to protect the stockholders against personal liability.  If a company complies with corporate formalities, creditors of the company generally cannot reach the stockholders to satisfy the company’s liabilities.  Thus, a company should generally incorporate before launching a product or a service due to potential liability issues, as the risk of liability to a founder increases with customers or users.

Hiring employees or third party contractors.  Although I’ve run into a situation where the former CEO of a Fortune 500 company personally paid an “employee” out of his own pocket for a year prior to incorporation while incubating an idea, most founders will need to incorporate a company if they intend to hire employees.  In addition, if an entrepreneur needs to engage third party contractors, it generally makes sense to incorporate a company so that the third party enters into an agreement with a company instead of an individual.  In addition, any IP created by the contractor can be assigned to the company instead of an individual founder.

You can find the original posting here.

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1) Undercapitalization

The most common reason why new businesses shut down is that the owner runs out of money. Cash flow is critical to a start-up business. You could be profitable and still have to close your doors because your customers are taking too long to pay you. Cash is king in a startup venture and you need to prepare for it.

2) Not thinking survival.

Starting a business is all about survival. How do you stay around one more day so that you can learn more about your market and close new customers?

3) Maintaining Momentum

Many new entrepreneurs have ambitions to start a business so they create a website, try to make a few sales, go all out for a few months and then stop completely. Building a business is all about momentum. If you had 24 hours to spend on a business they would be put to far better use by spending one hour a day than for 24 hours straight.

4) Trying to do it all alone.

Nobody is perfect or has the skills to do everything themselves. You need to understand what it is that you bring to the table and what you need to surround yourself with. If, for example, you are very strong at inventing but don’t want to sell then you need to find a salesperson to help you.

5) Not hiring the right people, right away.

You should begin looking at who can be brought on board to help you from the first day of starting your company. There will be tasks in any business that you, as the owner, should not be focusing on if you hope to build any sort of sizable organization. Why are you doing admin work when you should be out closing customers, talking to the media, and landing new partnerships?

6. Doing it just for the money.

If you don’t truly love your business then you won’t be successful. If you read the stories of famous entrepreneurs and how they built their organizations you will find that it all comes down to the root of loving what you are doing.

7. Getting to year 1, past year 2, and into year 3.

Many entrepreneurs have a hard time getting to the end of year one. Typically it’s because they started the business on a whim and got excited about an opportunity but didn’t do the proper research. These entrepreneurs usually run out of money and close down after a few months.

8. Building the business around your preferences, not those of your customers.

The best way to make a lot of money quickly is to find a customer who has a problem and is willing to pay you to solve it – and then you go out and build the solution. Most entrepreneurs take the opposite mentality of “if I build it, then will come” only to realize that they’ve built it and nobody is coming. Instead of talking to customers as to why they’re not coming they decided to continue building and building. Soon they find out that they’ve invested years of work and nobody is interested in buying from them.

9. Not seeking mentors.

A great way to get a business going is to find out what other people have done to achieve success and implement those strategies into your own company. Find mentors who have knowledge of your industry and will give you time out of their day to help you.You could set up a formal board of advisers and compensate people for their time but if you’re a startup you can play on the fact that most entrepreneurs are willing to help out a fellow business owner as a way to give back. If you show genuine appreciation and approach the right people, the advice you get will help make or break your company.

10. Working under a rock and not getting involved in the community.

Countless opportunities are generated by connecting with other young entrepreneurs and finding out what they are up to and how you can help. You will get new business opportunities, partners, investment, media attention, ideas for productive tools to use, advice for your company, and many other resources that otherwise would take you years of trial and error to figure out (if you ever do at all).

For more information, be sure to check out YoungEntrepreneur.com.

About YoungEntrepreneur.com

I have been an avid reader and subscriber to Youngentrepreneur.com for awhile – far before I started writing this blog.  It is a fantastic resource with lots of entrepreneurial advice, business growth strategies, startup experiences and marketing tips.

The website was founded by brothers Matthew and Adam Torren, and there is a blog managed by Evan Carmichael. Of particular value is the blog author’s personal insight, derived from his own experiences as an entrepreneur.  I especially like the entrepreneurial advice which he shares based on his own experiences. The site also has an awesome and very active forum for entrepreneurs to share advice, discuss business, and network.

Their blog contains tons of great information for entrepreneurs. One of my favorite categories is Entrepreneurship University in which experts share advice and provide lessons – extremely valuable information. Another great feature is the entrepreneur profiles. This blog is a must-read for any young or young at heart entrepreneur.

Youngentrepreneur.com is a must read for entrepreneurs, start-ups and small business. I will continue to monitor is as a great resource – you should consider doing the same.

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• What form of business entity should you choose?  There are multiple entries on this blog dealing with the various types of business entity a start-up can choose from.
• If there will be multiple owners (i.e. shareholders, partners or members), how will control of the business be structured?
• How much and how often will the business owners be paid?
• How will business records be maintained?
• Will the business hire employees, independent contractors, or a mix of the two?
• What type of  / how much liability insurance will the business need?
• Will the business enter into a lease for space?  Or will it buy and develop its own real estate?
• If the business will have employees, will it provide benefits? How will the business handle payroll?
• What types of banking relationships will be necessary?
• Will the business need to raise capital?  If so, will it be through debt or private equity?
• Will any sort of license or permit be required to conduct business?

These are just a few things that should be considered?  Need help sorting through your start-up business questions?  Contact start-up business attorney Brian V Powers.

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That was also the time when Microsoft and Apple were founded.

This of course is not to say that every start-up will reach that stratospheric level of success. But it is a sure sign that starting or growing a business during bad economic times is not impossible.  As pointed our by Paul Graham here, success in business is more about who you are, not when you do it.  A bad economy won’t kill you, but a good economy won’t save you.  Sure, investors and customers may be harder to come by now, but play that to your advantage. Come up with a cheaper way of doing something.  Go after investment capital while others are steering clear of it – thinking that nobody is investing (hint: they are still investing).

Want some more proof that good businesses can be founded during and grown out of a recession?  According to Gary Beach at PC World Magazine:

• 35 % of the 2008 Fortune 500 incorporated during a recession.
• 46% of the Fortune 100 incorporated during a downturn.
• 52% percent of the Fortune 50, 64% of the Fortune 25 and seven of the Fortune 10 all opened their doors while economic pain was all around them.

He comes to two very good conclusions.

First, if you are pining to start a company that you believe can scale to be one of the world’s most dominant firms, you shouldn’t be afraid to start it in a recession.

Second, watch your back. That 35 percent of the nation’s 500 largest public companies launched during a period like the one we’re in is stark evidence that-the recession notwithstanding-competitors are starting up all around you.

Now is as good a time as any to start or grow a business.  Adapt to the times.  Don’t focus on the economy.  Focus on your business – let others worry and be driven by fear of the economy.

Zig while others zag.

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• Don’t automatically flock to incorporating in Delaware.  Sure there might still be some advantages to doing so, but they don’t really apply to start-ups.
• In Indiana, where I practice law, the filing fees for incorporating a business are inexpensive and the process is relatively straightforward – not the case in popular states such as Delaware and Nevada.
• Attorneys in your home state, if you are using an attorney (hopefully you are), will be more familiar with your state incorporation laws.
• Your company may qualify for an intrastate securities law exemption in the event it offers securities for sale.
• There is no need to register as a foriegn entity in your home state – and added expense if you incorporate elsewhere.

As he points out, there are many other concerns that should be addressed when determining in what state you should incorporate – concerns you should address with a corporate attorney in your home state.

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Most of the characteristics of a partnership are shared by the limited liability company. The company is formed upon filing articles of organization with the Secretary of State’s office; rights and responsibilities are spelled out in a written operating agreement; the interests are freely transferable (though again, the transferee does not automatically become a member in the company); and the entity itself usually does not pay any tax, although some states other than Indiana do subject limited liability companies to franchise taxes.

A major difference between a partnership and a limited liability company is that each of its members enjoys liability protection. Another major difference is that in recent years, most states have recognized limited liability companies with only one owner. This means that you can protect yourself from personal liability and yet still operate your business, in many ways, as you would a sole proprietorship (presuming you comply with the formalities of the limited liability company). These so-called “single member LLCs” offer an important tax advantage—annual information can be reported on the owner’s individual tax return, and no separate tax return or identification number is required.

A limited liability company can either be managed by its members, or the members may select one or more managers (e.g., a board of managers similar to a corporate board of directors) to run the business. Most states will require you to decide upfront how the company will be managed. All things being equal, most business owners will choose the limited liability company form over the partnership form. However, things are almost never equal and nuances do exist. It is important to discuss these details with your attorney.

The Law Office of Brian V Powers works with new and prospective business owners to aid in the purchase, structuring and formation of a new business. We also provide convenient, fixed pricing for certain business formation legal services.  Contact us today at inquiries@bvplegal.com for help forming your Indiana Limited Liability Company.

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