Starting up with a friend
danieltenner.com
Starting up with a friend
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Re: Starting up with a friend
#2This is gold. Almost everyone new to entrepreneurship makes this mistake (not setting very clear expectations early on in a business), and it sucks. Here's the comment I left on the site:
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Very wise advice from someone whose already been there. Three more questions to think about:
1. Expenses: What is and is not an expense? Especially getting clear on business entertainment, business travel, "general life expenses that are also business expenses" like internet access, and so on. Also, what's the max dollar amount someone can spend on an expense without checking with the other person? My default advice is keep business expenses low and stick to the necessary. For a first company, say no to business entertainment, business travel, meals, general life expenses, and any hardware that a person would use for non-business reasons.
2. Profit distribution: When and how will profits be distributed? How much will be reinvested? What will the reserves be? What if one partner wants or needs cash, and the other wants to put it into expanding? This is an important question, and potentially contentious. Especially if your business is growing and money is coming in, but founders are in different places financially. Especially a point of contention if one founder is heavy in unsecured debt, and the other isn't.
3. Hours: When (not if) the hours you're working get unbalanced, how to handle that? Less an issue if it's both of your full time gigs and you're putting in full time effort each. Very important to think about if it's a side project or people have other obligations. The way I've seen work is that you define roles clearly to be completed on a plan to profitability, and once you're profitable, founders draw salary for regular, recurring work they do that's at market rates. If upkeep on the business after it's built successfully takes 15 hours/week, but lends itself to one founders skillset so he's doing 12 hours per week, you're going to have an issue really soon. Instead, that founder can get paid at around market rates, or you can outsource that part of his job.
Those are three I've seen issues with - unclear expectations on hours, profit distribution, and expenses. You've obviously been there Daniel, very nicely written up mate.
Re: Starting up with a friend
#3Its an excellent retrospective, given the emotion one must have invested in seeing a startup through to the Ramen profitable phase.
Re: Starting up with a friend
#4excelent piece of advise - one thing I find quite hard (impossible?), though, is to have EVERYTHING explicitly spoken/written: there are just so many variables out there, you'd probably lose a lot of time sketching things down - and still not covering the bases that will turn out to be problems...
Re: Starting up with a friend
#5excelent piece of advise - one thing I find quite hard (impossible?), though, is to have EVERYTHING explicitly spoken/written: there are just so many variables out there, you'd probably lose a lot of time sketching things down - and still not covering the bases that will turn out to be problems...
It's definitely impossible to plan for every eventuality, but that doesn't mean that doing some planning isn't useful. Ultimately, start-ups are very resource-constrained, so you have to do what you think matters most and hope for the best. If you at least have a good stab at answering the questions outlined in the articles (and the comment by Sebastian), you'll be a long way ahead of where you'd be with no planning.
Re: Starting up with a friend
#6This is gold. Almost everyone new to entrepreneurship makes this mistake (not setting very clear expectations early on in a business), and it sucks. Here's the comment I left on the site: -- Very wise advice from someone whose already been there. Three more questions to think about: 1. Expenses: What is and is not an expense? Especially getting clear on business entertainment, business travel, "general life expenses…
Thanks! I've added some of those questions into the list in the article (with link to the comment, but can link elsewhere if you want)
Re: Starting up with a friend
#7I'd add (from painful personal experience):
Get a lawyer to draw up a frame agreement for the corporation. No matter how much you trust each other, you need to get some documents in place that protect the individual interests of each party. Don't allow loopholes to exist that permit one party to screw over the other, no matter how convinced you are it would never happen.
Trust me on this.
Re: Starting up with a friend
#8My old school friend went to continue the business with another guy and left our company to die on my hands. I pulled it through on my own and had a steady income for 2 years.
Never trust your feelings and imagination. Plan your startup as a military operation then you should be alright.
Re: Starting up with a friend
#9This is gold. Almost everyone new to entrepreneurship makes this mistake (not setting very clear expectations early on in a business), and it sucks. Here's the comment I left on the site: -- Very wise advice from someone whose already been there. Three more questions to think about: 1. Expenses: What is and is not an expense? Especially getting clear on business entertainment, business travel, "general life expenses…
Thanks! I've added some of those questions into the list in the article (with link to the comment, but can link elsewhere if you want)
Ah, I didn't realize that was your site mate. You're one of my favorite submitters on here - it seems like I'm reading something insightful from you almost every day on here. Glad I was able to contribute a bit, and thanks again for being awesome.
Re: Starting up with a friend
#10a good thing to remember is that almost everyone out there and here on HN is a egotist first and a hacker (worker, etc) second