Saturday, October 07, 2006

Low Cost Startups

I took some entrepreneurship classes at GW (supposedly one of the better business schools in the country). I wasn't impressed. Not that the cirriculum was bad, just that the classes never addressed one of my objectives, starting a company without any money.
Of course you can't start a company with NO money, but you can start a company for very very little money. I'll center the example off of my plan for Splendid Web Solutions. Here's how:

1) Choose something you can do yourself, and can later be done by other people

2) Choose something that doesn't take many tools (software, hardware or otherwise), or uses things you already have. I had a computer already, and I already had internet access.

3) Find a partner that provides most of what you need. In my case, I needed hosting services (which I wouldn't provide or take credit for), and I also needed the online editing software for customers to use. Ivenue had this, and I found a hosting company with their software.

4) Spend money only as you make it. Essentially you are paying for something on a commission basis. In my case, each time I sell a site I pay the provider $250 for the site. I charge about $2500 on average, so the ROI.

5) Make some money. This is why you need to be able to do it yourself. Do it for a while before you hire anyone else. Other people cost money and it's easier to get someone once you've proved yourself.

6) Incorporate. This has all sorts of protections, see othe posts.

7) Hire people. I started by hiring a friend who did sales. I didn't have enough work (I wasn't working otherwise when I started). he knew sales but not web design. So I paid him COMMISSION. Every site that went trough I gave him a percentage. He loved it because he generally made much more than working at his company, but also because he could work on his schedule. I get the benefit of more projects without having to get better at selling the sites. Also, since he's on commission, I have no costs until he sells a site, at which point I have made more money than I need to pay him.

7.5) I also hired web designers to work on commission. They basically do the whole thing from finding a client to designing and selling the site. This is great since I do literally no work but get a percentage off each sale. I'm aiming to have 10-15 of these people in a couple of months.

8) Expand. Get bigger, grow the business, and move on. I'm going to try to get enough people doing design work, and maybe get some doing just sales (sales work gets spread to the designers), that I can focus on other areas of the business. I'd like to expand the offerings to include internet marketing. Basically, I can take my current clients and offer services to help get their sites listed on other sites or directories, provide marketing guidelines, etc. Eventually that too can be managed by someone else on a commission basis. Everyone makes out well and gains some experience.
I want to emphasis that this probably doesn't work to start a traditional company. I'm using the model of student labor for one. Students are happy to make more money than they can sitting somewhere in a part time job. Also, they are willing to work to gain the experience of dealing with clients, selling sites, etc.

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