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-get-good-press

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!