The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.
I am proud to have learned such a great deal from my failures, and the fact that I get to share them—and, more important, the hard-knocks lessons learned—with a worldwide audience is a real thrill. After all, what's the point of ending up in frivolous litigation, nearly losing your shirt, pitching VCs for tens of millions of dollars with no revenue model, or being forced to move back in with your parents if you can't have a few laughs as a result, right?
And with that, here are my top 10 lessons learned from my past failures that were well worth the price of admission (well, after I survived them, that is). Feel free to check out even more in Never Get a "Real" Job.
10. No revenue, no business. Period. Build a sustainable business for yourself, and not one based on hypothetical acquisitions or imaginary investment capital. If your business can cut it, you may be able to buy other companies down the road or raise VC. But treating either path as a guaranteed strategy is simply stupid. Bottom line: Stop thinking about many tomorrows from now, and focus on today. Cash flow, or die.
9. You are not special, a winner, or guaranteed squat (and neither is your business). If you are human, guess what? You are still bound by the rules of Darwin's theory of evolution or, at the very least, Murphy's Law. The worst thing you can do is fall for your own b.s., so stay focused, stop thinking you are a winner because you're excited and think your idea is brilliant, and go kick some real ass.
8. How many things can you do perfectly? If your answer is anything other than one, and you are a small start-up on a shoe-string, guess what? You are an idiot. Rome wasn't built in a day, neither was Google. Both were built brick by brick, scaled and then, and only then, did they diversify. Keep your business plan simple, because if it's not simple, you're dead.
7. Traditional business plans will bankrupt you. Don't get stuck in analysis paralysis! Business planning is not a revenue generating exercise. Execution is where the money is at. Write something short, sweet and to the point and get on with it. I always preach about my One Paragraph Start Up Plan as the best way to get started.
6. The worst case scenario is the only scenario. If you project 100 customers, you might get 10. If you predict a deal to close within 2 months, it might close in 12. The point is, you always need to be thinking about back up plans—and sometimes—back-up plans to your back-up plans. Don't rely on one way to do something, think about multiple paths. Cover yourself by thinking about alternatives at every turn and you'll become a much stronger decision maker.
5. Divide your "lowest" financial assumptions or expectations by 4. Anything you think you will earn before you execute, well, probably won't happen. Financial forecasts are like little gremlins that sit on your shoulders whispering sweet nothings in your ear about upward climbing bell curves. Don't get stuck on a grandiose financial milestone. Focus on growing organically and covering your basic life expenses before you worry about a six-figure salary or ten-digit company revenues.
In forming companies every day, we sometimes get clients who are starting some type of school or educational institution. If you would like to use the word school or college in your company name, there are some additional requirements.
Typically, we will check a company name for our client in about 5 seconds, and then tell them whether the name is available right then and there. When using the word “school” or “college”, it is not that simple. To use these words in your company name, you will need approval from the Delaware State Board of Education. In addition, the institution may be required to become accredited by a nationally recognized accrediting agency or association approved by the United States Department of Education. These are not the only requirements, but it seems this alone is sometime enough for clients to rethink their name choice.
8 Del.C. 125 States:
“No corporation created under the provisions of this chapter organized after April 18, 1945, shall have the power to confer academic or honorary degrees unless the certificate of incorporation or an amendment thereof shall expressly provide and unless the certificate of incorporation or an amendment thereof prior to its being filed in this the office of the Secretary of State shall have endorsed thereon the approval of the State Board of Education of this State…. Approval shall be granted only when it appears to the reasonable satisfaction of the State Board of Education, that the corporation is engaged in conducting a bona fide institution of higher learning, giving instruction in arts and letters, science, or the professions, or that the corporation proposes, in good faith, to engage in that field and has or will have the resources, including personnel, requisite for the conduct of an institution of higher learning.”
If you are starting a school or educational institution and would like more information on the requirements, Harvard Business Services, Inc. is happy to point you in the right direction.
Check out these statistics reported on Fox News about young entrepeneurs being on the increase.
1. Labor department statistic says unemployment rates have doubled among college graduates.
2. Job offers to college graduates have dropped 20% from 2008 to 2009.
3. More college grads are going into business for themselves and are willing to take the risks of business ownership.
4. College kids are changing the way they get jobs by creating their own businesses.
5. Entrepeneurship among college graduates of all ages is at a 15 year high, they are going into business for themselves.
6. Current unemployment with college graduates is at 4.3%, current National unemployment rate is 8.9%.
7. 26% of new businesses are created by people 20-34 years of age.
8. Small business is the backbone of America and the younger generations are the future.
For the past 9 years, the U.S. Chamber of Commerce has ranked the 50 states’ liability systems and corporate law structure as a whole. Delaware is unique in that it ranks #1 for the ninth year in a row in a survey generated by the United States Chamber Institute for Legal Reform. The survey polls judges, attorneys, professors and others for opinions on which state offers the best structure. Many states that are supposedly corporate friendly, such as Nevada, are buried deep in the list and continue to decline year after year while Delaware flourishes and repeatedly ranks highest on the list. After reading this report, it is not surprising that a good portion of our business comes from the state of California, considering its law structure is one of the absolute worst. Residents of Delaware are grateful for the strong corporate law structure their state has created because it benefits every resident. Over one-third of Delaware’s income can be attributed to the Division of Corporations. For example, in 2009, the corporate Franchise Tax alone generated $1,648 for the average Delaware household.
This strong corporate law structure protects individuals behind their companies, which is why money is generated from people around the world who incorporate in Delaware. This revenue even enables Delaware to be one of the few states without a sales tax. The state of Delaware will continue to keep laws on the cutting edge through consistent judgments and by maintaining a reasonable and fair legal environment for corporate entities. To review the report, go to http://www.instituteforlegalreform.com/states/delaware
Do you have a great idea but no money to fund it? Then check out IndieGoGo, a great website that provides a forum for people with dreams, like starting their own businesses. You can easily create a funding campaign to raise money quickly and securely by tapping into your network of supporters and reaching people you don't know. For just a small percentage of the money raised, IndieGoGo's trusted platform has helped to raise millions of dollars for over 20,000 campaigns across 171 countries. You can even offer unique perks or tax deductions to your contributors in lieu of offering profit, and unlike finding investors, you keep 100% ownership in your company.