Instigator Blog

I agree that spending a lot of money on software is a mistake for most businesses, especially new ones, but I'm not sure I'd suggest web-based office tools like Writely and Google Spreadsheet over the equally free, but more traditional Openoffice.org for most businesses.

Zak - thanks for the comment and recommendation. I've never used OpenOffice but I've heard a lot about it.

I wasn't listing a definitive group of recommended software applications, only providing some examples of Office-related tools that are free/inexpensive and decent at doing the job.

OpenOffice could have easily been listed there.

I hope you enjoyed the post and keep on coming back -- I'm off to check out doomed startup now!

Base on my experience having good brochures and business cards is quite important, at least in consulting business. I think still depends on the country, but in majority of Asian countries things like that are important. People are simply very visual in this region of the world and they'll judge you by the design of your brochures rather than your offer. Thus, I think all this depends on the type of business you're running and your location.

However, I must admit that if your business model is wrong, you won't make it better with expensive brochures and high quality business cards. So, the business model is the most important and if it is good enough it is possible to succeed even without good branding.

MB - thanks for the feedback. It's interesting that you mention potential cultural differences to what's important in starting up a business. Anyone else want to add their thoughts in about that?

I see you're in Jakarta. I've been to Bali, Indonesia before - it's an amazingly beautiful spot.

I think point 3 is a very important one. Even more if we consider web-based companies. With the right approach one should be able to create a lot of buzz around his product leveraging social networks.

The entire post should have started with the first sentence of Point 3, "It may depend somewhat on the business..."
Going "virtual" will not work if target customers are not online.

Using "free" software can add up to lost efficiencies if they don't do the job or require special training. Again "It may depend somewhat on the business...", if the potential staff knows MS Office front-wards & back then using something cheaper or free will cost down the line on production. MS Office Standard can found for under $300. I am no big fan of Microsoft but if it is apparent the group I am thinking of hiring cannot afford a $300 investment in software I start to wonder about their financial health and if they are going to be around for the duration of the project or services.

While I agree with part of the recommendations regarding staff and I think advertising can be ineffective, all 5 points relate to customer's perceptions. If a company being considering has zero marketing materials (or collateral that is easily identified as on-the-cheap), is using freeware, works from home and has "vapor-staff" they better have a very unique product/service or they will be staying home.

Dear Ben,

Please save me money and fix your "home office" link. It's item #4.

xoxo,

Matt

ps - nice blog

I agree with most of your points, but the office one needs more explaining. I've found that without a designed place to work that is outside of the home setting, it's too easy to get distracted from real work. Having a place where all of the principals of the business can come together and work at the same time, whether it's someone's garage or cheap rented space, can add a motivating push to get work gone. When you are sitting across from someone who is working the peer pressure can keep you on track.

I agree with #3... Advertising is expensive. Small business owners should take a look at Fast Pitch (www.fastpitchnetworking.com). It's an online destination likened to eHarmony for Buiness. It takes information about your business and recommends leads to you. They also host events (virtual and offline).

Also, sites like LinkedIn, Jigsaw and Ryze offer a variety of ways to connect as well.

Regardless of how you go about it... there are ways to create word of mouth (buzz) without breaking the bank.

If you're starting a business, and remotely serious about it, you *don't* want to use Google apps, or any other other app that stores content on someone else's servers for you... unless you find it acceptable to allow another company to keep your confidential documents for you... Instead why not recommend OpenOffice? Sure I realize it's not web2.0 and thusly not half as cool for you kids... but it's open source, so that's good for something, right?

Innovation Zen - thanks for the feedback. Many (at digg.com) have said advertising is a must and very important. It has it's place, and for a local mom-and-pop shop, an ad in the yellow pages may do the trick.

But you're right, there are other ways of generating buzz, and while some say, "blogs aren't for small businesses or mom and pop operations" I'd disagree.

Look at the buzz this post has generated on digg. Granted, a lot of the comments there are openly hostile, but it's still buzz...

Hope to see you around some more!

Big Dan - You're right. I could have prefaced the entire post and said, "depending on your business..." but I think you could do that for almost any subject, and in a way that diminishes from the focus of the post itself.

There's lots of extremely successful "virtual companies" -- true, most are in the tech/software/web field (which is also where I spend most of my time.)

If, for example, your business relies on meeting face-to-face with clients, and they want to see an established location, or you're in retail (obvious), then an office suddenly becomes much more important.

So, yes, it does depend. But, I don't think we can de-value those that work at home or in virtual offices; cause there are plenty that do quite well for themselves.

Thanks for stopping by, I hope you'll stick around!

JonQTaxpayer - You're right. Meeting face-to-face is hard to beat. Sure, you can use tools like Skype for video conferencing, but it's hard to replace the touchy-feely benefits of in-person get-togethers.

And, I bet many people would agree with you: working at home is hard. But lots of people do it. I'd recommend the link I have in the post - visit Joe's site. Check out Wendy's site at http://www.emomsathome.com too.

It's not for everyone, but it can work.

Thanks for participating in the discussion!

Matt A - link fixed! Sorry! And Thank You!

Johnny Branson - thanks for the links. I use LinkedIn but not the others. I have heard good things about JigSaw, mostly because you have to pay to play so the quality of people in there is higher.

Thanks for joining the discussion...

AoE - I used those links as examples, I wasn't absolutely recommending those services.

But I appreciate that you called me a "kid" -- makes me feel young!

Someone else recommended OpenOffice too. I haven't used it, but I'm all for finding alternatives that work.

I do understand your concern about content storage, but in this day and age I think the "software as a service" model is generally recognized as being advantageous for certain things, even with certain drawbacks. But, it's a concern worth nothing.

One last point - I'm not a "Web 2.0" fanatic, far from it. I want software that works well / does what I need it to do. There's some Web 2.0 stuff that's like that, and other stuff that's junk. That's always the way it is with software, whether it's Web 2.0, Web 1.0 or desktop-based.

Keep on coming back and thanks for joining the discussion!

Very informative! Nice subject. The first year of business is usually the make or break year. Anything you can do to cut costs and keep your head above the water is a good thing. Try to focus on the main goal and not get distracted by trivialities.

Hey Ben,

These are some great tips, I like #4 best. ;-)

Thanks for the nod.

Joe

Toggo - glad you liked it. I hope you'll participate in the Blog About 5 Things Week!

Joe - anything I can do to help. It was a casually placed link, but strategic too. I'm glad it worked for you...

I would just like to point out that there is a big difference between "ex." and "e.g.". When doing business correspondence, make sure you're using the correct one.

Use free software is a nice tips. But for a business we must respect the license agreement. I read the licesnse agreement of Skype and it don't authorize the usage of Skype for commercial use =(. Please, watch the license agreement.

PL

PS : Sorry for my bad english.

With regards to Point 5 always refer to services like www.elance.com and www.guru.com. great for pricing estimates and sourcing capable providers.

Regards,

Dan

Love the advices. I have found something similar on the internet before, but never this many advice at one place. Good work.

Working location and enviornment is most important IMHO. If you are working from home, make sure you have got sound proof room where you can concentrate on work. A crying child, talking spouse or yelling TV next room can destroy the working mood.

Nice assertion here.

Ben Yoskovitz:

GPL software can be used to any purpose for free. Maybe the Skype examples (and others) on this article aren't a very happy choice, but you can use an entire operating system and aplications for free in your buisness, legally of course. Software at almost 0 cost! (well you have to download it).

Don't let sofware salesman (or guys that use pirated versions of the most expensive software) convince you otherwise.

Best

Osvaldo

Good post. I have 2 comments about the "Staff" section.

1. I don't recommend giving equity left and right to save a few hundred dollars. Equity is a pretty serious commitment. Imagine if you give equity to your accountant and it doesn't work out after a couple of weeks. Well you'll have to deal with them forever because they own shares in your company. Give equity for something big that will make or break your business. Avoid equity for small things or until you're confident about the relationship.

2. Don't hesitate to outsource to low cost countries. I wish the best to US-based coders but a start-up with limited resources can't afford most of them. It's risky but if you have limited resources everything you do is risky. So use sites like rentacoder or Elance. Start with small projects and highly rated coders initially until you are comfortable.

On a final note, get your product/service in front of users as early as possible. Feedback is extremely valuable. Nobody gets it right the first time.

Pier-Luc -- I'm going to have to review Skype's user agreements -- if you can provide a link that'd be great!

I have a hard time imagining that Skype won't allow you to use its service for business -- i.e. talking to clients, business partners, etc. My guess would be that they won't allow you to make money off Skype, which I can understand completely.

Millions and millions of people use it in a "business setting" I'm sure, that's where it has one of its biggest advantages.

But we'll have to verify.

Jeff - all good advice.

Equity is precious, I agree. You shouldn't throw it around to accountants and the such. But, don't hold onto it like it's gold. It's not worth anything until someone is willing to buy it. If there's a chance to bring someone onboard for a bit of equity, and that person can make a commitment and a difference, it's worth considering.

I've never used those outsourced coding services like Rent-a-coder or Elance but I know some people that have used them with good success.

And your last bit of advice is definitely worth heeding.

Thanks for stopping by, hope to see you around some more!

You meant to say "here _are_ 5 things," not "here _is_ five things."

Regarding Software, it would be a mistake to define this as a rule as you have done (#4). I am currently in the process of gearing up my own business and follow everything you have here to a 'T' except this one. Not that I didn't make an attempt at operating solely on open source software, but there are hidden implications. I'll use concrete examples since I have them.

First, we started out using openBSD on the routers and Gentoo Linux for the servers so that the network was heterogenous (0-day 'sploit in one only gets you so far). Given power issues the OpenBSD boxes would corrupt the drives and require user intervention all of the time, so we switched those to Linux too. Along the 2004.x Gentoo path to current ebuilds, there were major changes to the x-windows support, apache, java and a few others, causing headaches along the way. We're now moving to Ubuntu since there really isn't a need to build from sources except on the dev box (keeping Gentoo there). The lesson there has been that OSS upgrades can be more aggressive than commercial software and become time sinks if they are not carefully watched.

Next, specific kinds of software. OSS options for bug tracking and software design didn't work out. Bugzilla is not client friendly and the IDE plugins I have seen are missing the mark. If a piece of software is key to your business, or the client has to interact with it, commercial software pays for itself. While support on active projects user lists is arguably better than commercial closed software, if the maintainers decide to change direction (netbeans 3.x to 4.x for example), you may be left in the cold. Situations where we ran into this were defect tracking and design. We opted for JIRA & Enterprise Architect instead of free alternatives.

So to conclude, don't be adamant about not spending money on software if it's particularly important to your business. You will pay for it later. OpenOffice, yes, Bugzilla, no. And recognize that software driven by the community can change more rapidly than commercial software.

Kris - thanks for the in-depth analysis. I think it's helpful to see differing opinions and to also talk about specific examples.

In no way in #4 above am I saying "never used software you have to pay for."

My point was to say - "there are options out there that are worth looking at." They may or may not suit your specific business though.

The focus of my point was primarily for productivity-related software, but there's tons of other software out there with paid and free options. It's a question of doing an evaluation of needs and looking for a good fit.

Thanks again, hope to see you back!

Two free PDF tools for you: primopdf to create PDF, pdftk (or pdftk builder) to manipulate PDF.

Cheers- Sid
pdftk guy

I haven't used either of those, but I've used: http://www.pdfonline.com/

It lets you convert documents to PDF format from a variety of formats. I use it most often for converting Word to PDF for show notes on The Great Big Small Business Show podcast (http://www.gbsbs.com). It's very easy to use and works well.

Thanks for the tool tips Sid...

I liked Benjamin's article so much I created a mini post as a comment based on his 5 things concept.

5 things you should spend money on when starting a business and how not to.

1) Identity package. Logo, branding and business identity are worth every penny spent. As a small start up digital photography service business, I didn't expect to spend $8K on design services right off the bat - Ouch. In retrospect, it was the best money I ever spent. My brand is stronger than all of my competitors combined. Clients even comment how everything we touch reflects our style (branding delivery media, packaging, t-shirts, blog etc...). You might be able to trade services to offset some of the cost but don't skimp on your companies identity.

2) Inexpensive marketing materials. I agree with Ben's observation about spending lots of money on brochure's at the beginning of the company. However, we produced ours in house and with friends/relatives who worked with our identity package and helped create a nice 4 color brochure. We then leveraged the relationship of a staff member with a printer that they used regularly at their previous job. Our business cards were printed using 4 colors with a matt finish very cheaply by an online self serve company (4by6.com). Clients (especially in the photo and advertising industry) often comment on our great business cards.

3) Blog design. I know you can use a free template and get up and running very quickly but your blog is another opportunity to brand you business and set you apart. We wanted our blog to be separate from our corporate web site and have it's own voice. No one is going to want to read an online corporate brochure. We gave it a controversial name that has become our company slogan - DeathToFilm. The art director at one of our corporate clients liked our concept and expressed interest in helping design our blog. We ended up trading services by helping him set up his photo archives.

4) Advertising. In our 18 month history we have only recently run print ads. The two trade magazine that we chose to put our ad dollars into are the yearly guides that customers keep as a reference. We can run print ads once a year and get the most bang for the buck. You might want to approach your industry's trade magazines and offer to write articles or exchange other services for advertising space. Additionally, teaching and lecturing across the country has provided sweat equity advertising. Establishing yourself as the expert in your field takes more time than money and will help build buzz about your company.

5) Office space and staff. This won't work for everyone but I took on a partner who provided office space in the photo district of Hollywood. This is prime real estate and we couldn't have afforded it if we had to pay market prices. Staff members are added when the position can pay for itself. As the managing partner, I typically do the job until we can afford to pay someone to fill the position. Then I move to the next position that needs filled until someone else can be hired to take over. This is how to build staff using sweat equity.

The moral of this story is to use your skills and relationships instead of your cash. You will be surprised at how much talent is available to you from your friends, family and industry contacts and don't be afraid to roll up your sleeves to work off some of your expenses.

great post ben. you even made techmeme! nice work.

best - michael

Thanks Michael.

Techmeme was a surprise, so was showing up on del.icio.us/popular.

Heck, getting nearly 800 diggs was shocking too. All in all a rather shocking / fun experience.

Thanks for stopping by!

Ben,

First let me say "thank you" for recommending my company (GreatFX) in your post.

Business cards are an powerful marketing tool, if you use them correctly.

Take for instance a card that is plain with one or two ink colors, maybe an image and some text. Sounds boring huh... that's because it is. It looks like every other business card out there and doesn't shout "HEY LOOK AT ME, I REPRESENT A TOP-NOTCH COMPANY!".

The key here is to differentiate your business card from all the others.

The best way to do this is to make the card unique or valuable. One of the most unique business cards I've seen is computer hacker's business card that was metal and featured a set of lock picking tools. Search Google Images for "Lockpick Business Card" to see images this fantastic card.

On the other hand is added value. Ask yourself first what your customers want? Do they want a discount, a loyalty program, free stuff or useful information? By adding one or more of these things to your card, you are giving people a reason to hang on to it now and in the future.

A business card is an impression you leave behind after meeting someone new... my question to you is, what does your business card say about you?

Chris - thanks for stopping by. That metal business card does sound interesting. I'll have to go find that and take a look.

I'm sure most people don't give their business cards enough consideration, but I agree that there's definitely value there.

Thanks for adding to the conversation!

Jeff - I think you are oversimplifying the cost of outsourcing. If your company is going to sell a piece of software of a software based service, it might not be a good idea. Why would you develop your core competency with people outside of your company? And also, who's going to architect the product, people in your company or people who work for somebody else? Not to mention that even if you do have an outsourced group doing the work, you need to have somebody with you advising you so you are not sold an unworkable solution that is going to blow up in your face when the project ends.

I know there are success stories with some outsourcing, but there are also huge horror stories. I work at a very large company, with lots of resources in India and China, and even with all our resources these efforts are hit and miss and hard to manage.

For a small company, it's usually good to have at least one person that is pretty good technically and let them do most of the work. If they need help, let them tell you how, but don't throw bodies at the problem. Just make sure you have the brain power to figure out the solutions.

If your company just needs some custom software tools to get it's job done, that are not it's core competency, outsourcing to anybody (doesn't have to be in another country) might make more sense.

What about outsourcing legal items? There is a lot of software for creating contracts. Its also not that expensive to set up a corporation.

Augusto
Points well taken. I agree that outsourcing is very risky. But starting a business when you have limited resources already puts you in the crazy risky category. Here are my 2 cents on outsourcing (in the context of a web startup):
- Design: absolutely in the US (or whatever your market/country is). You'll pay outrageous money but it's worth, particularly logo/brand identity
- Architecture: As much as possible keep that in-house.
- Coder: I've had good experiences and bad ones. the price difference with the US is such that in some cases, I was able to have 2 different coders work a project, pay them both, continue with whoever was more reliable/skilled, and still come out under 20% of what I was being quoted in the US. Not sure if that was clear.

I think we can all agree that if you have the money, consider hiring someone in the US because you'll have more accountability. But if you can't afford US rates and you still want to get something done, then don't hesitate to try outsourcing (starting with smaller projects).

Thanks for keeping the discussing going Jeff and Augusto.

Remember, you guys are talking about launching a software biz too - where, I agree, the software IS your core competency, and outsourcing is maybe less interesting.

But if software dev isn't your core competency and you need something smaller: an administrative tool in-house, a small addition to your website, etc. then I think outsourcing is a strong option.

I've heard a lot of positive things about outsourcing testing to places like India, for example. Not quite the core of what you do (if you're in the software biz) but to bring on extra manpower and eyeballs at that phase of the game...

We do a lot of outsourcing of testing to India, but to be quite honest, sometimes making sure you have good automated test suites is much more efficient than again throwing a lot of bodies at the problem.

Yeah, if software is not your core competency, it's different but for in house tools I would say it's more important to have somebody local that is tech savy enough that can figure out if there aren't any open source/commercial tools already that do the job rather than reinvent the wheel.

My experience with lots of internal apps is that there's too much reimplemntation of things that are already out there.

A counterpoint in the spirit of "Blog about 5 things week":


5 things you SHOULD spend your money on when starting a business


BTW, I think your traceback URI may be broken :-(

Here's a great article from a few months ago that I think would be a good addition to this post. Press can be a good an inexpensive way to get some promo for your business. it has worked for us in the past.

http://www.thinkvitamin.com/features/biz/how-to...

Wow, Ben--del.icio.us, Digg and Lifehacker all in two days?! You're on fire!

I agree with prudent spending overall, but I am relieved to see some people have already chimed in on the importance of good ID/branding/etc. No, you don't need EVERY marketing piece that will eventually be in your materials arsenal, but a great logo and business card go a long way towards making people "get" you, not to mention taking you seriously. And that stuff is (ahem) better left to professionals.

Michael Britt's suggestion is spot on: explain your predicament to your designer, pay him/her the right amount for what s/he does, and find other ways to economize.

Great post, though, and thanks for initiating this discussion!

Ben,

this past year I have been involved in 4 start-ups. We have relied heavily on the free and opensource resources you mention here. So far we haven't any problems with reliability or compatibility. (Ok, so Skype gets a bit garbled sometimes...)
Great post, I will start working on a "5 Things" post of my own.

Warren - thanks for commenting. And thanks for the link, definitely a worthwhile read.

Colleen - Hopefully I didn't come across as saying, "Brands are pointless" In fact, with Grasshopper New Media one of the things I want to do as Director of Ops is to build a brand around GNM, through each of the properties. I'm a strong believer in brand, image and how you project yourself. But I think it's also easy to get caught up in slick brochures and the like which may not bring immediate value...

Edward - I can't wait to see your "5 Things" posts! We need more! I've got a few waiting to be published, as soon as I get up to 5...

As a slight counterpoint, I wrote "5 things you SHOULD spend money on when you start a business":
http://dionea.wordpress.com/2006/10/04/5-things...

Dionea -- I saw that. I'll be linking to it soon ... just as soon as I get a couple more submissions to Blog About 5 Things Week!

Thanks for participating!

Great Tips!
Speaking of not paying for things...two things that have helped me out:

efax.com - a free fax number (not local but hey it's free)

http://www.grandcentral.com - a currently free (beta) local telephone number that forwards calls to one or more selected numbers. It gives me an option to have a separate work voicemail on my cell and a lot of other options. A must for anyone who only has one phone!

and I really agree with #3 The best way I've found to advertise is networking! Just tell everyone what you do and ask everyone what they do... you never know who's sitting right next to you... they might be your next biggest customer!

efax is a great tool. I use that one for my own business, so should have thought of that. The good thing about efax is that it turns faxes into PDFs and emails them to you - very easy to work with...no equipment required.

Thanks for contributing!

I'm really enjoying the posts on your blog, Ben and I want to thank everyone for their input as well.

In regards to software I agree, use all the freeware/shareware that works.

One online tool I found that works really well for maintaining your schedule, contacts and notes of conversations is found at http://www.FreeCRM.com.

If you don't want to spend the money up front for a CRM you can use the free version and then of course as your business grwos they offer the for pay version with a few more bells and whistles.

Thanks again,
Marty D

Marty -- glad you like Instigator Blog. Thanks for commenting and I hope you'll keep adding to the discussion!

I've never used that CRM tool, but free CRM makes sense for a lot of small businesses.

I'm more familiar with SugarCRM which I believe is also free. (Or at least has a free version.)

There's something else you forgot to mention that you shouldn't pay for. Labor.

I notice on your www.grasshoppernewmedia.com site that you want audio and video interns, but you don't want to pay them.

I love the guise of "it's good for your resume". Would be good if it was a skilled work position, but really...sound checking mp3s and uploading to a site..my mom can do that.

On top of that, you are expecting people with dedication and skill...

(From the grasshoppernewmedia.com)...Here’s a test question: Do people say, “Wow. I just had to show you once, and then you did it!” Do they say, “I can’t believe how much energy you have! When do you find time to sleep?” Have people said, “I’m so glad you’re on the team. I know I can trust your stuff to come in fine.” If you’ve answered yes to all three, get in touch. If not, good luck!

So you want all 3 of the qualities in UNPAID staff.

Hilarious.

Congratulations, you made it in the top list of lists. Please take a look here: http://uberlogging.blogspot.com/2006/10/top-lis...

what?

who's on first?

Always look at Return on Investment.
Some things are investments, others are expenses. Avoid all expenses, measure all Investments based on direct returns.

For example, hiring 2 people to get 2 contracts is an investment. Buying a refrigerator for the office is an expense.

I'm keen to spread the word about outsourcing (no. 5) during the early years.

I provide business support solutions to solo entrepreneurs and small enterprises. Persuading business owners of the benefits of investing in outsourcing rather than hiring staff is hard going!

I've experienced first hand the side effects of hiring staff before a small business is financially secure to commit to paying employee salaries - in the worst case scenario leading to bankruptcy!

Every business will need to use different business solutions such as CRM (Customer Relationship Management) and ERP (Enterprise Resource Planning) to manage business relations with customers, sales, marketing, accounting, etc.

Instead of purchasing an expensive traditional install-base CRM and ERP solutions, you can rent it by subscribing to an online CRM or ERP system such as Salesboom.com or Netsuite.

Not only will you save tremendous amounts of money by going the software-as-a-service route, but you will never have to deal with shelf software, since your company will only pay for what it needs and uses.

Those were some great suggestions. I know when I started out my friends were the first ones I spoke to about getting an opportunity going. Then when I put my system online I realized I needed to make Friends everywhere.

It wasn't until just a couple months back when I started advertising online. But like you said before... Network network network

Online advertising is the most important thing to my opinion, which I only stated using after 4 years in my business. The investments I've made in advertising were so high and not allways worth it, compared to online advertising which is cheaper and affective.

Not advertising a new business is the DUMBEST piece of advice. Sure, take out a $200,000+ business loan but don't let anyone know where you are located or what you offer. PR will only take you so far. If you don't include a decent yearly ad budget into your business plan then your business probably won't last long...or you'll just make enough to get by. Who wants that? I deal with new businesses on a daily basis and all the ones who don't set aside a yearly ad budget are closed with in 8-15 months. If you want your business to fail...don't advertise!

@Jennifer: I'd still argue that advertising is overrated. Again, it depends on the business. A local restaurant will have to advertise. A freelance writer who is getting a lot of contracts from the Web, doesn't need to.

I still would argue that blogging, using social media and the Web effectively can work for almost any business and supplant much of a company's advertising budget early on.

@Ben, @Jennifer: Agreed that it depends on the type of business you are running and the products and services you offer as to where and how you advertise. As an Internet-based business, GreatFX has no need to advertise on local television or radio. Local business publications would be a much better investment, though I admit I have not yet taken an ad out.

To advertise on the cheap, I've been visiting networking groups in town, getting to know other local business owners. This helps improve my communication skills and cheap advertising/connections are a nice perk too.