> The concept of entrepreneurism as a small-time life-style has evaporated from the culture, and now entrepreneur and start-up means “get big fast.”
No. Get yourself out of the filter bubble, because it is seriously warping your understanding of the world.
There are still orders of magnitude more "small-time" start-up businesses in the world than "get big fast" start-up businesses. Your town probably has dozens of them: they're restaurants, roofing companies, independent tradesman, etc. Those people are all doing exactly what you're talking about.
When you tell people you are doing a start-up it is deeply implied you're doing something with the hopes of hitting it big. Because if it wasn't you would just tell them you "run a roofing company" or are "an electrician" or "sell stationary on the internet"
A start-up, even to non-technicals, connotes an attempt to hit it big.
I've worked for two tech companies doing fairly cutting-edge R&D that were definitely "start-ups" in every sense of the word, called themselves such, but were never developed with the intention of getting a bunch of VC money then making a big exit. These are much more common than you probably realize, even within the tech sector.
Getting really big then exiting basically necessitates that you have to be in a mass-market business. But do only mass-market businesses get to call themselves start-ups? Is there no place for start-ups in specialized fields with significant revenue potential but without the kind of universal applicability that makes VC's wet their pants?
It's interesting how nomenclature changes your perception of a business. It is acceptable for a tech startup, for example, to pursue try to increase adoption rate by giving away a service for free in the hopes of securing investment. It would not be nearly as acceptable for a restaurant to give away free food to get more diners in an effort to lure investors.
A slight distinction is that no restaurant would make it an ongoing policy to give away free food to every customer who walked in the door. Rather, restaurants will have a buy one get one free promo, or a free dessert with entree purchase to lure more paying customers.
I'm currently developing SaaS for a certain service industry in Sweden.
I wouldn't say this is hitting it small, nor is it batting for the major leagues. It's a decent sized chunk of project that will build the skills and capital needed for our next level-up sometime in the future.
Careful. Your valid point is one KK is making too by recommending this book. He's just setting the stage by contrasting this approach with how 'start-up' has come to be associated with "get big fast" in our tech world.
The very point being made is that Don Lancaster describes how to be successful in business without having to get big fast. KK is merely pointing out how Don did this before entrepreneurism came to be associated with fast growth.
Your question and ef4's comment are caught in an attractor of a different debate.
I spent the better part of high school with a copy of Lancaster's TTL Cookbook in hand (still have my dog-eared copy). Then as an undergrad in 78 I re-read this primer for success. While I was more inclined towards the 'enterprise' track, this book nonetheless helped shape my attitude about money, time, and purpose. I can't recall another book that combined (good) advice regarding cashflow, always giving customers something extra, working with your body's natural cycles of energy, retirement funding, and "modifying a television set for a better money machine" (by cutting the cord and throwing it away). Still a worthwhile read, IMO.
Oh! The book is by Don Lancaster! I missed that. His electronics books were a key part of my self-education in the early 80s, as I'm sure they were for a lot of computery types my age. Guy is a hacker in the most hackerist sense possible.
I remember reading his Hardware Hacker column in Radio-Electronics magazine. I recall an article from 1989 where he described how to build a 3D printer using a UV-sensitive resin. 1989!
Wow, now that's an old book by a real guy who could breadboard TTL chips into the equivalent of a graphics card at that time. Sort of another Wozniak, though that kind of bare metal knowledge was expected of all EE's.
What he has to say is not compatible with the current pop culture "startup" hype but it's still valid.
One thing also mentioned is correct: when you're in business, sometimes you get more than you expected, just for showing up. That very rarely happens in a regular "job."
"""Employees are a hassle, a waste of time and ploney and a psychic
energy sink. You should avoid them at all costs.
Your incredible secret money machine should have 0.834 employees-that
is 83.4 percent of you, nothing more,no less. The remaining
16.6 percent of you should go for fun and rewind time"""
For most businesses, this idea is a little too hippy/artisan from my experience.
If the product is mostly YOU, you're going to burn out if you refuse to hire anyone to do those repetitive tasks that many, many other people can do for a modest wage.
For example only: you ship something physical, do you really want to spend 1/3 of your day, every day, forever, boxing up product and taking it to the post office?
If you've ever offered phone support, you know what I'm talking about too.
There's a guy who lives in my neighborhood that blows glass; his specialty is blowing Klein bottles (http://en.wikipedia.org/wiki/Klein_bottles). I know about him because2 or 3 days a week he shows up at my local post office right before it shuts, with a net bag that has 5-10 boxes in which he is shipping out to customers. He knows everyone at the post office by name and always gives them a big hello; he has printed and affixed the postage at his home/workshop, but brings them to the post office so he can see the tracking numbers get scanned. As there is no paperwork to fill out, and they know him, he gets handled almost immediately - typically someone will come out to scan the packages when they hear him arrive.
And since there is usually a line of people at the post office near closing time, invariably someone asks what it is that he's shipping (because it's unusual to see someone turning up with a bag of packages like Santa Claus). And he tells them what he does. Strangely, he never has any business cards on him (people always ask). So he asks them to give him their phone number instead. And they do. Now, I'm going froma small sample, but I've seen this repeat itself often enough to think of it as a schtick; at a conservative estimate, every time he drops off his packages, there's a 50% chance that he gets one new customer lead. He sells the bottles for ~$25-50 depending on the size, and marginal costs are pretty low. I'd say he's doing pretty well at his craft business, since he's shipping out a few hundred $ worth of product every time I see him, and more to the point he seems like he's having a really good time.
Obviously this sort of thing doesn't scale well, and imposes a ceiling on the amount one can earn. But as Adam Smith observed, while the division of labor may be highly efficient it's also soul-destroying. Running a one-man show like this is certainly a valid alternative to working in a shop where one is regularly called on for 'crunch time' or 'sprints' or 'hackathons'.
>Strangely, he never has any business cards on him (people always ask). So he asks them to give him their phone number instead.
Did you mean the "Strangely" here? What he's doing is, in fact, very clever. A business card is a passive, easy thing that will rarely lead to further action. Asking for the phone number is a much better gauge of how serious the person is.
Over the years, I have seen hundreds of examples of money machine people being severely done in by the patent system. Even murdered by it in several heart-attack-during-litigation cases. And not once did I see anyone approaching the patent system on a small scale basis and profiting from it. Ever. Once again: Unless you are well within a Fortune 500 context, any and all involvement in the patent system in any, shape, or form is absolutely certain to cause you the net loss of time, energy, money, and sanity. Besides ending up a totally useless and utterly unnecessary psychic energy sink.
Maybe the pdf has more information about building machines that either singularly or at least collectively are resilient to patent attacks.
I've worked for two non-F500 (think 10-25 engineers) companies that made their revenues developing, consulting on, and licensing, their patented technology.
It still sounds like pretty good advice given the context.
There are lots of non-F500 companies that make their revenues developing and consulting on non-patented technology, so it doesn't necessarily follow that their revenues were solely due to patents.
We sold technology, not end user products, because we weren't in the business of who could find the cheapest Chinese manufacturer. If we didn't have patents, we'd have to replicate a fragile version of them contractually. Patents gave us a ready made legal instrument we could transact with. I think that's their real value to industry.
I don't think we ever sued anyone, but we probably would have had little use for the ability to sue people who arrived at the technology independently. Our worry wasn't about monopolizing the idea, because it wasn't obvious, but protecting ourselves from getting ripped off through copying. We probably wouldn't have published on it then though.
I mentioned this in another thread, but I'll reference it here. So you know about the Ansari X Prize. The company who won it was Scaled Composites, headed by Burt Rutan. The actual work was the result of investment by Paul Allen. The Spaceship One was patented, and the IP is held by a holding company that embodies Allen's investment. Allen didn't invest in the research for the piddling $10 million prize. He didn't do it so he could get into the spaceship manufacturing business. He did it so he could sell the IP to someone who wanted to handle the actual building and flying part of the equation. Burt Rutan is objectively a genius, and has invested 30 years in Scaled Composites. What is the end result of those 30 years of research by top-notch PhD's? The company doesn't have huge factories, a stockpile of cash, etc. The value of the business is a pile of IP.
I don't think the law has to protect every business model, but I do think it's a little weird that you can employ a team of construction workers for a year to build a house and have some hard assets to show for it, but people argue that you shouldn't have anything to show for employing a team of PhD's for a year. There has to be some mechanism for transacting in the results of research. Maybe that mechanism needs to look different than the existing patent mechanism, but I think it needs to exist. I think there is value in a company full of PhD's that's not intrinsically bogged down with the need to manufacture end-user products.
The pdf continues "The problem is not the patent system per se, but all the popular mythology that has built up around what patents are and how they are supposed to work. That quarter you mailed in for your classified ad "inventor's idea kit" in the seventh grade has done more damage in more ways to more people more often than you could possibly ever imagine."
I read that to suggest the "popular mythology" of patents as small inventors making millions from patents as completely wrong. Not sure what to make of the inventor's idea kit sentence.
The PDF is free. Kevin Kelly wrote "If I had to sum up this book in my own words it would be: If you are willing to build your business on expertise, you can make a living instead of making a fortune--and occasionally the fortune comes anyway."
This is a great read, it talks to me, I've run my computer business like this and it's certainly worked as well as some friends who have taken great jobs, and had them taken. At least my way I create my own failures, there is something satisfying in that even if it does not always result in a lavish lifestyle.
I've read the book (and TTL Cookbook, of course) and met Don Lancaster a couple of times at social gatherings.
I think the biggest message of this book is how to bootstrap yourself in making money doing something you love to do. This book is important because it shows how Lancaster (and many people who have read this book) went from a "you can't get there from here" position to doing what they love. You don't have to be a hippy or limit yourself to a lifestyle business to make use of the knowledge in this book.
Reading through the intro, he managed to get some things right and some things horribly wrong. Predictions from 1992 of technologies that would fail : solid state cooling, QWERTY alternatives, touch screens, NeXT computers, UNIX, TrueType, DVI video & Teletext.
The concept of entrepreneurism as a small-time life-style has evaporated from the culture, and now entrepreneur and start-up means “get big fast.”
I dunno... I guess it depends on what filter bubble you live in and what echo chamber you participate in, and any number of other factors, but my feeling has been that, yes, "startup" - as opposed to "small busines" - does mean a business that's intended to grow very big (not necessarily fast though) and is more in the mold of your typical Silicon Valley "startup". OTOH, I've always perceived that people use the term "entrepreneur" to refer to anyone from a one man plumbing company, to a startup that's aiming to be the next Facebook. "Entrepreneur" to me includes mom and pop restaurants, tradesmen of various kinds, small consulting companies, whatever.
But, in either case, regardless of how the terminology has been changed over time, the idea of "entrepreneurship as a small-time life-style" clearly still exists. Maybe now people use the term "lifestyle business" but who really cares about the label?
Every entrepreneur needs to make a decision before setting out - what is your goal? Is it to get rich or is it a better lifestyle through a job you love to do every day? Sometimes, rarely, these two meet. But there is a big difference between a lifestyle business and a growth business. Paul Hawken wrote a book about this particular subject and focused on the the lifestyle business - ones that grow slowly and are more about the lifestyle of the owner than reaping massive profits. These tend to be smaller businesses with one1
I fall on the growth side right now. My lifestyle suffers greatly because I'm working so much. Hopefully that will change one day when I make my riches (LOL). But one day I will "retire" into a lifestyle business of some sort. I was thinking renting jet skis at the beach would be cool.
Growing a Business [1] is the book you're talking about it. I picked it up on a whim from a book sale a couple years ago and it was an interesting read. Like this one, some things are fairly outdated (talks a fair bit about catalog sales), but overall pretty sound advice for building a sustainable business.
I have read the book (paper copy) and recommend it. It is a relatively quick read, you can knock it out over three cups of coffee at a coffee shop on a Saturday afternoon or on a medium length plane flight, and I think most people would benefit from it and feel inspired.
Yes, I read Lancaster's book back when it was published. It's crushingly out of date in today's world, however. No sane person in 2013 will subject him/herself and family to the risks of operating any business as a sole proprietorship or even a partnership. Get a freaking lawyer and accountant and buy business insurance. Do it right or don't do it!
An LLC is a very lightweight, easy to establish corporate vehicle that provides personal protection for the business owner. When running a sole proprietorship, if your business gets sued, they sue you for your personal money. If your LLC gets sued, it's much, much harder for them to go after your personal property. Today's society is too litigation happy to risk personal homes and wealth with a simple sole proprietorship/partnership. An LLC or C or S-corp is easy and fairly cheap to establish compared with how much it's possible to lose.
As a sole proprietor, there is absolutely no benefit to incorporation (or running as an LLC). It is pointless overhead. There is no tax advantage (at least not for modest levels of income) and there is no liability advantage. This stems from the fact that you can always be held personally liable for anything you do whether acting as yourself or as the officer of a company. As the company's only officer, you can be held personally liable for anything your company does. The corporate veil is easily pierced in a one person business.
There may be some value of running as an LLC or corporation rather than as a partnership as this protects you personally from the stupidity of your partner. Perhaps, I am over-cautious, however, as I would never even consider going into business with someone where I thought there was any chance of him screwing me over intentionally or by accident.
Finally, if you start having employees, incorporating might be worthwhile to protect you from the stupid actions of your employees.
While it's true that an LLC or other corporate entity CAN protect you from personal liability, it's only a starting point. To insure that the entity is respected (meaning it's assets alone are solely liable for satisfying any judgment) it's important to do at least the following (not an exclusive list):
1. when you form the company, have a decent amount of capital in the company's bank account (yes a separate account in the company's name);
2. make sure you follow all corporate formalities, including:
(a) regular meetings with minutes
(b) updated books and records containing minutes, authorizations/resolutions for company officers to act on behalf of the company, etc.
3. Try to have more than just yourself as an officer (have more than one officer);
4. Keep separate accounts and don't commingle personal and corporate money;
5. Purchase a reasonable amount of liability insurance;
6. Make all required federal and state filings (including employment development department, etc.)
I always get the feeling that lots of startup entrepreneurs get the impression that just setting up a corporation through an online provider is the end of the process, in reality it's just the beginning. If you don't follow through you might as well save your money and just operate as a sole proprietorship.
Thank you, that's a very detailed list of things to remember and take care of. I've heard of 'piercing the corporate veil' in cases of gross negligence on behalf of the business, so nothing protects a person fully, but it sounds like there are definitely more harmless ways it can happen, too.
Is there a book out there that describes how to run a limited liability company in various jurisdictions, effectively "open sourcing" the company process for small players? Even better if it's coupled with code that guides you though the process.
I'm pretty sure there are 50 such books, one per state. OK, maybe not 50, because I'm not sure every state defines an LLC structure. But certainly you can find shelves full of books on "How to incorporate and run a NC LLC" or "How to start an LLC in California" etc. They explain all the paperwork necessary to file your LLC, talk about the reporting requirements, etc., and explain the stuff about required meetings, minutes, etc. Basically, all the nit picky bureaucratic details of keeping the State happy about your LLC. There are separate books on dealing with the tax side of things, so you'll find titles like "LLC Taxation for Small Businesses" etc. Can't remember if those are usually state specific or not.
Of course, if you choose to incorporate your own LLC (or C-corp or S-corp or whatever) there's always risk in that vs. hiring a professional to do it for you. I'm not really suggesting one approach or the other, but FWIW, I chose to incorporate our NC LLC myself by using one of those books and the stuff from the appropriate NC gov website.
But, also FWIW, if/when the day comes that we start trying to raise outside money or doing any complicated deals involving ownership/equity, we'll reincorporate as a Delaware C-corp, and I expect to hire a seasoned lawyer who specializes in that kind of thing, to take care of that.
Lawyers and accountants just aren't that expensive. Really. For the common case ("I just want to set up a company") you could be in and out in an hour and face only a moderate premium over the underlying fees.
I mean I don't try to do my own dentistry. And like others on HN I make fun of people who think they can program after doing a mail merge.
So why would I try to do my own legal and accounting stuff? Given the potential downsides, that's just crazy.
The chances are that once I knew more about it, I'd think it's crazy too, especially for the general case. I'm curious whether it is possible to reduce the difficulty of operating as a single person limited liability company to the same level of difficulty as operating as a sole-trader.
The limit of my complexity is occasionally emailing my accountant to ask whether to book things against me or the company.
The people I work for require me to be incorporated, so that pretty much settles that.
As for curiousity: again, I just ask the professionals. They are likely to give me a correct answer.
I do sometimes look things up myself, but there's always the nagging doubt that I've mistaken a technical term for its common meaning, or that I lack some key conceptual framework or whathaveyou.
One relatively cheap way to learn about how to observe corporate formalities is to google "legal MCLE" in your state of incorporation/residence/doing business and look for a one hour MCLE course that covers the subject. It will be cheap ($20 or less) and you will have no problem understanding the content. It may also come with checklists and a presentation. I just finished my legal MCLE requirements for California and there are tons of valuable information for entrepreneurs on these types of basic subjects that you can access much more cheaply than using a lawyer.
I've never looked, I don't know. It's an interesting thought though. Googling 'california llc' gives me the impression that there are plenty of commercial providers who will fill the forms for you. I doubt there's an open source version of these webapps.
No. Get yourself out of the filter bubble, because it is seriously warping your understanding of the world.
There are still orders of magnitude more "small-time" start-up businesses in the world than "get big fast" start-up businesses. Your town probably has dozens of them: they're restaurants, roofing companies, independent tradesman, etc. Those people are all doing exactly what you're talking about.