Top 7 Advice for First Time Entrepreneurs

On my way to my third Internet Start-Up here are some of the most important things I’ve learned so far as an online entrepreneur. I hope they can be useful for your ventures…

1. Invest your time wisely: Do not invest your time in tasks that are NOT DIRECTLY RELATED TO GENERATE SALES or improve your bottom line results. Until you reach break even, nothing else matters. “Strategic” or “Long term Goals” are fine for mature companies in mature markets. Start-Ups must focus almost exclusively in reaching break even and reaffirming their survival. After that you can count to 10… take a deep breath… and start focusing on mid/long term strategy, corporate culture, board room structuring, your ERP, etc. But not before. You’ll be a dead company if you start focusing your energies in things other than financial independence.
2. Bet on People: I know this is the most used cliché in Business Jargon. Everybody says all the time that “people is the most important resource”. Believe me, In a Start-Up this is 10,000 times more important. ONLY if you manage to get the very best people at least for your key positions, you’ll be able to make it. Even if you do hire the best of the best, you still have a very high chance of failure… the thing is that if you don’t, your chance of failure becomes 100%. Don’t believe the old saying that Star-Ups must pay lower than average wages. Do what it takes to attract the people you need. If it’s a higher wage, a higher stock option or a higher variable pay, don’t hesitate, go for it. These people are the only reason that will make your company successful at the end, not the fact that you saved 10% or 15% on salaries.
3. Don’t be afraid to dilute: Percentages mean nothing, what matters is that your stake grows in dollar terms with every new investor. If you had 60% of a $100,000 company and you went to a 10% stake on a $1’000,000 company you did just great: you went from $60,000 worth of stock to $100,000 worth of stock. You made money. Dilution is necessary, otherwise is impossible to bring new people or investors on board. Helps a lot to plan from the beginning how much of your stock you’ll give away and at which price, but usually you’ll need to give up more. Don’t be afraid. Remember that “%’s” don’t buy things… “dollars” do.
4. Make all costs variable: Avoid fix costs as if they were the devil. When you start a new business, especially if it’s a little bit of a breakthrough and you don’t have solid benchmarks to compare with, you don’t know what will work and what won’t. You need to keep everything variable so you can get out of it if it doesn’t work. You try, and after a while when you know by experience (not by what says on the Business Plan) what works and what doesn’t, you can decide on investing on a longer term and make a variable cost fixed. Never at the beginning.
5. Raise serious money AFTER you have a prototype/dummy version: Ideas are worth nothing, companies do. How much would you pay me if I told you I have an Idea for the next  Search Engine Application that will change the world?  Nothing. How much would you pay me if I had that application already programmed and could show you how it works? A bit more Don’t you think?… You might have brilliant ideas, but is important that you know that Ideas can’t be patented, registered or sold. As hard as it may sound for you, it’s important that in real life, Ideas by themselves are worth nothing until they become something tangible, something you can show, in other words, until they are implemented. Investors know that and either they invest in your idea asking you a much higher premium if you don’t have a prototype or demo version… or they just don’t invest at all. Try to make a demo version with your own resources (use the 3 F’s to raise your initial funds: Friends, Fools and Family) and then go out to raise the serious money.
6. Be ready to flexible: It doesn’t matter how well you make your business plan, how expert the people on board you have, if you’re making an innovative business model YOUR BUSINESS WILL NEVER GO AS PLANNED. Don’t be afraid. Some things will go better than expected and usually more things will go worse than planned, but you have to be flexible enough to adjust quickly. Flexibility is your only advantage against more established companies, with more stable clients and more resources.
7. Be humble: This one goes especially for those High flying executives from technology firms that have been fired or want to leave the corporate world and start their own business. Here’s some important news: Most of your acquired knowledge and competences ARE NOT TRANSFERRABLE to the start-up environment. You might have been employee of the year ten times in a row, or had a meteoric corporate career, but most of what you needed to advance in your corporate world career, will be useless when setting up a Start-Up. Don’t think that because of your successful prior experience you’re qualified to set up a business… you’ll be wrong. It’s better to be humble and assume that this role requires you to learn a new set of skills, usually skills that you don’t have.

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