When I started contracting, I had just dropped out of grad school and was doing everything on a shoestring. I think we took an advance on my in-laws credit card just to buy me a machine, and my wife (who was still a grad student at that time) bought Visual Studio 6.0 Professional Edition at the Cal student store so I’d have something to hack with.
I had a copy of Wage Slave No More, which was new at that time, just published the previous year, so I learned how to set up a sole proprietorship and get a fictitious business name and business license and everything. Back in the day when some but not all of this information was available online, and you still had to (gasp) phone people.
I also read various books about business, mostly geared at middle-managers in large businesses or wannabe Donald Trump imitators. I read Rich Dad, Poor Dad. I read a lot of junk about real estate investing. I don’t think I read a lot of books aimed at small business owners or solo practitioners.
But that’s what I wound up being: not quite a real small business owner, which typically means someone with, like, inventory and premises and all that jazz. And I’m not quite a solo practitioner because our business is a partnership between me and my wife, and not just in the “You do the work, honey, and I’ll do the bookkeeping and reception” division of labor that some couples seem to adopt. We aim to be working together on each line of code that we produce and deliver to clients. We achieve that in practice I’d guess about 80% of the time, and the remaining 20% is divided between me haring off in some wild direction and occasionally bringing back some value, random open-source hackery, sysadmin work, and blogging.
So from time to time I’ll write about what it’s like to have a small software shop with no intention of growing and tell some of the stories. We’ve been up and down over the years… I think the low point was when we had agreed to buy a house, and the three months worth of client invoices that were due between the purchase agreement and the closing just kept on being due until a good two months past the closing. And then we took the money and… well, that’s best left for another time.
But accounting — or rather, bookkeeping — is where I’m going next.
In our previous conversation, we were debating the difference between running a “start-up” vs. your “solo practice / small business”. From my limited perspective, you’ve pretty much had to deal with most of the key business issues face by startups with a few key exceptions:
1. External investors
2. Board of directors (often same folks as #1)
3. Raising capital
The actual business of running the start-up is similar to what you do day-to-day: cash management, setting business / personal priorities, trying to balance short term deliverables with longer term vision / value creation.
The three “missing” items I listed can be charitably described as providing the executive habittrail in the startup world. On a shockingly frequent cycle, the company founders / execs must spend a rather large amount of energy to continue to convince a panel of judges that they are
1. competent to continue running the company
2. have Kreskin like powers to accurately predict technical progress, market adoption, and foreign currency exchange rates for the next 36 months down to the penny
The board of directors can and should provide helpful guidance as well as access to useful contacts outside the company. Preparing for board meetings forces the company executives to review the company’s activities and cash balance on a regular basis which is a good thing.
Unfortunately, the process of keeping the Board happy can easily get confused with the process of actually running the company. A company which notionally designs, manufactures, and sells a new, high-tech product should be focusing its marketing energy on those customers to develop and grow a sustainable business. For most start-ups, however, a large part of the marketing energy is directed towards securing additional investment funds instead. Capital is useful stuff and organic growth is rarely sufficiently rapid to satisfy either the founding entrepreneurs or the investment syndicate. Sadly, a significant percentage of the investment funds get spent on raising more investment funds in one form or another.
On the plus side, I’ve become quite adept at running on the hamster wheel and the food pellets we get as rewards at the end of the maze are actually pretty damn tasty. If you’ll excuse me, I have a 200 page business plan to edit.