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daily articles for founders

Using advisors to raise money  

Very interesting article by VC Nic Brisbourne, examining the usefulness of advisors in raising startup money. Some interesting numbers:

Advisors are typically small partnerships, or individuals, who help startups raise money from venture capitalists. They usually charge some form of retainer, and then a success fee of a percentage of funds raised and perhaps some options. Retainers normally range from £5,000 to £10,000 a month, the percentage of funds raised between three and five per cent, and options up to 0.5 per cent of the business.

These retainers sound expensive, but, as Nic later points out, if using an advisor is right for you, and you're dealing with an experienced advisor with a close-to-100% success rate, this can certainly be worth the money.

Nic also advises startups who are considering this route not to bother with unknown advisors:

If you are going to use an advisor, then for heaven’s sake go for one who is well respected, well known, and has a wide network. Otherwise you might as well email the VCs yourself.

More in the article.

Management is a support function  

Here's a great article from Joel Spolsky, which makes the point that management is not about command and control, but about providing support:

Thus, the upside-down pyramid. Stop thinking of the management team at the top of the organization. Start thinking of the software developers, the designers, the product managers, and the front line sales people as the top of the organization.

The “management team” isn’t the “decision making” team. It’s a support function. You may want to call them administration instead of management, which will keep them from getting too big for their britches.

While there is certainly plenty of decision-making required at the "top" (mostly about strategic direction and key hires), the decisions on what to do to react to specific daily business situations should be driven by those closest to those decisions.

The sad thing is, management gurus like Peter Drucker have banged on that drum since the 50's, and yet many businesses still operate as if centralised decision making was viable to build large businesses. It's not. As Spolsky (and, a few decades ago, Drucker) point out, centralised decision-making is simply not scalable.

That being said, of course, "building a large business" is not everyone's aim. If you don't want your business to get big anyway, you can probably sustain centralised decision-making until your business gets to a few people or so.

Email options

I've added some more granularity to the email subscriptions.

Change your options!

First of all, there is now a "change your options here" link at the top and bottom of every email (which you can see now if you're getting this by email). This enables you to set one of three flags:

  1. Receive full length articles
  2. Receive linked posts
  3. Receive reposts

By default, only the first one is enabled. This is because I suspect that most people who subscribe are interested in the full length articles, and don't want to receive more than 1 email a day. Over the last week I realised that one of the things that slowed down/stopped my posting was the fear of spamming email subscribers with articles that weren't "important" enough. The full length articles never have that problem, but the shorter ones... well, it feels more risky.

If you want to get the linked posts as well as the full articles, you need to change your options now.

If you want a full blast of startup articles every day, just turn on all the options. You will get at least 4 reposts emailed to you every day, and probably 1 full length article and up to 4 linked posts. A sensible setting is probably to get just the full length articles and linked posts.

A new sender

I've also updated the "sender" of swombat.com articles to be daniel@swombat.com rather than the highly impersonal subscriptions@swombat.com. Feel free to reply if you have some thoughts about any article that is being posted, linked to or reposted!

What's still missing?

Daily and weekly batching is still on the todo list. It will happen, thus giving you the option to get all of your swombat.com in a single daily or weekly email. Give me some time, though, I've been incredibly busy for the last few weeks.


Process cults  

Alex Payne writes an insightful attack on the idea that dutifully following a process will get you a successful startup:

Process Cults form around a set of business practices that, when judiciously applied, are supposed to yield a profitable, successful business run by shiny, happy people. The startup segment of the business book market has its favorites:

  • Eric Reis’s lean startup and associated book.
  • Steve Blank’s customer development and associated book.
  • 37signals’ methodology, as expressed in the books Getting Real and REWORK.

I have read all of the above. I don’t necessarily agree or disagree with their contents. What I disagree with is the notion that anyone should start or operate a business in the explicit mold of someone else’s experience, as reduced to a couple hundred pages padded with illustrations and diagrams.

I believe processes are in fact helpful, but only when supported by a solid set of skills backed by painfully earned experience.

Importantly, a process can help you avoid some common mistakes. Processes are like recipes, but they are not recipes - they are much more open-ended. Yes, every business is different, but most businesses fail in common and avoidable ways and following a well-tested process will at least reduce the chance you fail in a boring way (though it may not increase the chance you succeed).

How to create your own video  

On the one hand, this article underestimates the tremendous effort required to put together a good video, especially if you're not a visually talented person (i.e. someone who can scribble stuff and make it look good). On the other hand, Woobius managed to put a number of videos that looked fairly professional, all on a zero budget (see here and here and here), so it certainly is possible.

If you have access to someone (a cofounder or even simply a friend) who is visually talented, this article can take away some of the mystery of putting together a video for your product. Since videos do tend to increase conversion, this may well be worth doing.

I'd say there are two points in a startup's life where it makes sense to throw together your own video. One is before coding anything, as part of a "video MVP" to test the market. There, it's really important not to invest too much time in the video, since it's really just a simple test of the market demand.

The other point is when you've got a website up, and you're trying to increase conversion rates. There, it makes sense to invest a bit more time into the video, but you may still be at a stage where cash is tight and you don't want to spend thousands of dollars on a "proper" video, especially if you don't know whether it'll actually help conversions in your case.

Later on, when you have the financial resources, hiring professionals to put the video together is a better option.

Acquiring startups for a living  

Excellent story by Rob Walling about acquiring a product called HitTail from a larger company who neglected it, and starting the process of turning it into a bigger success.

So I tend to focus on ideas that have a 1000x higher chance of success than the next un-monetizable social website you have in mind, but the success I strive for is a bit more modest. Probably close to 1/1000th of the payout of a big exit.

But I believe this approach is far more likely to make you happy, and far more likely to actually make a difference in the lives of more than the handful of people who hit the startup lottery each year.

That can't make his investors happy. Oh wait, he doesn't have any.

Tough choices

We all have priorities in our evaluation of different aspects of life and business, whether conscious or subconscious. When we make decisions that respect those priorities, we tend to feel at peace. When we make decisions in conflict with those priorities, we feel that something's wrong. In some cases, being forced (by circumstances, someone, or one's own lack of awareness) into making such a decision can leave one very distraught.

Very often, the right choice can be found by simply "feeling" for it. You can rationalise it all you want, and even come up with elaborate, sophisticated and very convincing arguments for why it's right, but cheating on your partner (to take an obvious example) feels wrong, and that's your subconscious telling you this is not the right choice according to your priorities.

Unfortunately, life also throws much tougher choices at you. Making decisions is (comparatively) easy when there's a right choice and a wrong choice, but in many situations, it feels like there's no right choice - just wrong choices. In those situations, no matter what you do, someone will lose out on something and they'll be pissed off at you for making that choice. These are what I call "tough choices" - they're tough, because all the options feel wrong.

This happens particularly often in business. Tough business decisions are inevitable. Whether it's dealing with a fallout between cofounders, firing an employee that's not performing, negotiating a tough deal, or even assigning shares in a new business, businesses seem to have an almost magical way of providing an endless series of tough choices. To make matters worse, many startups are like pressure cookers that heighten emotions and drama and make all those decisions seem even more important and personal to those involved.

I've had my share of these tough choices (though there are no doubt many more to come), and I've come to realise that there are some very fundamental principles that can help with those situations.

1. Be aware of (all) your options

Most of the "tough choices" in life are artificially limited. "You have no other choice," says the authority figure in the famous Milgram experiment. "Oh, I have a lot of choices", replies one of the very few subjects who resisted this artificial narrowing of possibilities. Watch it for yourself here. It's inspiring.

Life and business throw many real "tough choices" at you, but the first thing you should do when faced with one is not to make a decision, but to see if the landscape of choices can be expanded. Many times, it can. In particular, it is always worth being suspicious of the menu of choices on offer, when it is offered by someone else. Chances are, consciously or not, the choices on that menu will be crafted to lead you to make the choice that someone else wants you to make. That is one of the most common ways that you can end up making decisions that conflict with your internal compass, and which you end up regretting.

Another factor that often limits our choices is our own axioms of behaviour. "I won't break my word" is a common one, which is easily discarded in extreme circumstances, but which we hesitate to disregard in normal situations. I am an honest and sincere person, but if I was in Nazi Germany, and an SS was asking where the Jews are hiding (and they happened to be in my neighbour's cellar), I would lie to them without hesitation and not feel bad about it. In more mundane situations, we tend to ignore this option of evading our own behavioural axioms.

Now, I'm not suggesting that breaking your word should become a routine, daily maneuver (though I'm sure some people will misunderstand this... this is the internet, after all). However, when you have really tough choices to make, I believe it's important to consider all options - including those that involve behaviours that you would not normally condone.

So, the first tool at our disposal is to reject externally and internally dictated set of choices and explore the full landscape of choice. This should be an automatic reaction to a situation where a tough choice presents itself.

2. Be aware of your priorities

The second principle is to be aware of what your priorities are. I'm not talking about your business priorities, or your priorities as an entrepreneur, though both of those matter and you should be very aware of them. Ultimately, however, you will have to live with your choices as a person, as a human being. So what are your priorities on a personal level?

Everyone will have a different set of priorities there, and the point is not to judge whether your priorities are what they should be (that's a whole different exercise), but simply to be clearly aware of what they are.

Are friends more important than business? That's an important bit of internal compass to be aware of when you start businesses with friends, because you will probably end up being faced with a decision that hinges on this question, some day.

Is creating value for customers more important than making profits? Are employees' livelihoods (if you hire any) more important than your own financial outcome from the business? Is your family more important than your employees? Is being entirely honest more important than closing the sale, or is it ok to be mostly honest? Is your health more or less important than your achievements as an entrepreneur? Would you sacrifice your life to make that dent in the universe?

There are many such questions that you can ask yourself. They're tough questions, whose answers will often determine your decisions when faced with a tough choice. Yes, they seem more personal than business-driven, but that simply reflects the fact that business is (for now) conducted by human beings, not by impersonal processes. You have to live with your decisions on a personal level, no matter how you may try to justify them as "just business".

Many may look at these questions and say "well, I don't want to make that choice - I value both family and employees", or "friends are just as important as business, I don't want to screw up either". Fine, tell yourself that if you want to, but that's just denial (similar to a product manager ranking all of 50 items on the development plan as "highest priority"). Some day, you'll be faced with a choice where either your employees or your family will be disappointed with you, where you'll either hamstring your business or your friendship, and then you'll have to choose one of the two.

That the choices will come is inevitable. What I'm suggesting is that by spending the time now, when you're not facing a crisis, to clarify what your priorities are, you will find it much easier to deal with the tough choices calmly, without panic, and correctly, when they do come.

A worthwhile exercise, then, is to try and figure out what are your top three or five priorities in life. What are the things that trump all others, and in what order do you place them? Having done this homework (and redoing it when you sense that your priorities have changed) helps in both personal and business life.

This is the second tool to deal with tough choices: be aware of your priorities in life, so that you can use them when making tough choices.

3. Erring on the right side

Sometimes, even though you're aware of your priorities and the full landscape of your choices, you might be confused about which choice best supports them. It might seem that all the options disregard your priorities equally.

When priorities fail, you can still fall back on universally accepted human values. Generosity, mercy, freedom, love, peace, life - those values (and many others) are universally accepted as good, and, should all other methods fail, falling back to them is a final safety net to make decisions that you can live with.

This might seem melodramatic, but it is a powerful tool when faced with the really tough choices.

If all the choices seem to contradict your priorities equally, which of the options is more generous, more merciful? If every decision is a mistake anyway, we can at least try to choose so that our mistakes lead us towards a better world rather than a worse one.

That is the final line of defence: if every choice is an error, we still have the choice to err towards good rather than evil.

In conclusion

I've proposed three principles to deal with the tough choices that come with every business. All of them start by accepting that we live with our decisions as human beings. "It's just business, it's not personal" is a fallacy. Everything is always personal to both the decider and the ones impacted by the decision, and recognising that leads to a framework that enables people to make decisions that they can live with.

The three principles are:

  1. Reject externally and internally dictated sets of choices and explore the landscape of choices on your own.
  2. Be aware of your own priorities in life, so that you can use them to guide your tough decisions.
  3. If every choice still feels like a mistake, err on the side of good, universal human values.

I hope you find this useful the next time you are faced with tough choices.


You don't need a million dollars

When people talk about starting startups, one of the implicit statements is the idea of making it big - of building high-growth, outrageously profitable businesses that will make everyone involved in them rich. And in fact, high growth is even part of my definition of "startup".

VCs, angels, and in fact all investors, have a vested interest in seeing lots of people trying to build big businesses. It is well known that startup investment follows a "hit" business model, where most of the returns of a fund are made by a handful of big hits, which make up for a lot of failure. So pretty much all the literature produced by investors pushes founders to think big, aim for the moon, and give it their best shot.

However, my experience of talking to a lot of would-be entrepreneurs is that most of them simply want to run their own business, to escape the clutches of the corporate world, gain the freedom and security of being their own boss, and so on. The advice to swing for the fences is completely inappropriate in those cases.

Even if you do want to eventually "make a million dollars", which is a euphemism for making enough money that you can maintain a comfortable lifestyle for at least a decade without needing to work for it, aiming straight for the million dollars is often not the right approach. The reality is, it's much easier to make a million dollars when you're an experienced entrepreneurs who knows how to build a profitable business, than it is to do so from a standing start, straight out of the corporate world or university.

A better approach

My advice to people who want to be entrepreneurs but have not yet acquired the skills to build and run a successful business is to aim first for financial independence, rather than try to make it big.

If you can create a business that pays a sufficient percentage of your current salary, but is entirely yours (no investors) and enables you to have full control over your time, you're much further along the way to success (however you define it) than if you're still bound in effective peonage to some employer who owns most of your time.

Entrepreneurship is a career

The tech startup world of Silicon Valley, with is stories of insane working hours, mind-blowing successes, and its dismissal of serial entrepreneurs as crazy people, has perpetuated the myth of the startup as a singular event. You "decide to do a startup", you go and do it, and then you exit and retire, having compressed your working life into a short period and dealt with the money issue once and for all. But that's not how it is in practice - at least not outside the Valley.

I look around at friends and acquaintances who are entrepreneurs, people that I know personally, and all of them, successful or not, are serial entrepreneurs, and happy to be so. What will they do if/when they "finish" their current business? Why, start working on the next idea, of course! I look at myself, and, having run my own business for the last half-decade, I wouldn't have it any other way. Running your own business is hard, but it's infinitely better than letting your soul slowly grind away in a job you find uninspiring. Being your own boss has a lot of perks in terms of lifestyle and personal freedom.

Despite its reputation, entrepreneurship also a much more secure occupation than having a job. Being a competent, skilled entrepreneur means having the ability to seek out business opportunities and make money out of them. No matter the business climate - boom, bust, depression, recession, or even war - there are always business opportunities and so there will always "be work" for entrepreneurs.

Entrepreneurship is the safest career there exists today.

When you see entrepreneurship as a career rather than a single-shot lottery ticket, you don't need to aim for a million dollars. It's enough to start by achieving the "survival" level of success, then make sure that each subsequent step takes you further up the ladder along whatever dimensions of success you care about.


The startup skill set

I went to LeanCamp London last Sunday. It was a blast - there were a lot of interesting people to meet, and one of the highlights was, of course, seeing Eric Ries answer a whole bunch of questions very intelligently and entertainingly.

Another key highlight, for me, was my own "workshop" talk, judiciously titled "Lean Startup Skill Set". Was it really specifically lean? Perhaps not, but it's a skill set that will help any entrepreneur trying to build a startup, particularly those that use Lean methods.

My premise, as I explained previously, is that success (at least to the "survival" or "comfort" levels) in the startup world has more to do with skills than with ideas. A skilled entrepreneur will achieve some measure of success even with a mediocre idea. An unskilled entrepreneur is likely to fail even with a brilliant idea whose time has come.

There are exceptions, of course, but you can't rely on being the exception any more than you can rely on winning the lottery. So the best approach as a new entrepreneur is to try and fill the glaring gaps in your skill set (via learning, partnerships and mentorship) so that if your startup fails, at least it will be failing for an interesting reason.

The workshop's purpose, then, was to discuss what those core entrepreneurial skills are and where to learn them.

For this article, I'll just list the skills we ended up with at the end of the workshop, along with a brief description. Over the next few weeks, I'll pick a number of these and cover them in more detail, including thoughts about what someone can do, concretely, to learn those skills. As I do this, I will update this article to include links to those articles, so the best article to bookmark is this one.

The purpose of the startup skill set

It's worth noting, before diving into the list, that none of those skills are absolutely mandatory. You can (and founders do, all the time) build a successful business while severely lacking in one of these areas. However, what is clear about all those skills is that they help. Being at least baseline-competent in all the skills on this list will markedly decrease the chances that you screw up your first business in a really obvious and easy to avoid way.

One of the reasons it works that way is because the options you will see for evolving and adapting your startup will be directly related to your skills. If you are a programmer, then building a tool to automate part of your business is an option. If you know how to sell, then customer development is an obvious approach. On the other hand, if you lack those skills, those options will seem less appealing, so you're less likely to use them, even if they make sense. The landscape of your skills determines what choices you make when developing your business. The more gaps in that landscape, the more gaps in your business.

Some of these skills (but not all) can be outsourced or delegated. However, the sad reality of delegation is that you can only truly delegate work that you understand. So even if you plan to get an external designer to do your design work, you still need some basic design skills to understand and evaluate their work.

1. Client management and customer service

Being able to handle clients and support your products or services is an essential entrepreneurial skill. Early on, and perhaps for the whole life of the startup, the founders will be doing this.

In the B2B world, this skill essentially consists of being able to handle nice and not-so-nice clients, to deal with both professionally, ensure that clients are happy with your service, feel well cared for, well informed, and don't end up "blowing up" because of some avoidable mistake you made. It also involves knowing how to react to a client actually blowing up, how to handle them the right way so they turn back into a happy client.

In the B2C world this consists of being able to respond to support queries in a polite and efficient manner, always remembering that every customer interaction is an opportunity to delight. It also consists of being able to deal with pissed off customers without losing your cool and making a fool of yourself. On the web, great customer service is a differentiator - or even, in some cases, a price of entry.

2. Sales

Directly related, but very different, is the skill of selling things. Although I said that these skills are optional, if you're going to learn one skill, let it be this one. As the saying goes, "sales cures all management ills". If you screw up everything else completely, sales won't save you, but making enough sales can at least give you the time to learn the other stuff.

"Sales" is a big word, covering everything from selling a $10 subscription on your website to selling a million-dollar contract to a large corporation. Funnily enough, the two are not as unrelated as they might seem. Certainly, someone who is highly skilled in one of those will find it easier to learn the other than someone who is completely unskilled in sales.

Being able to sell stuff, online or in person, is also incredibly easy to practice, so long as you are willing to try unusual things, as we'll see in later articles.

3. Making things

"I make stuff" is the credo of the hacker-entrepreneur. My parents used to ask me, when I was a kid, "what can you make?" It is always possible to build a business without making things, or by selling other people's ability to make things, but having that ability yourself is a huge bonus as an entrepreneur. It makes it easier to explore ideas, and it makes it much easier to communicate with others who make things.

Making things is split into multiple sub-skills: programming, design, and even engineering (and, perhaps, in the future, biotechnology! "Click here to download this YC-funded DNA patch and grow a third arm!"). But all of those stem from an impulse to "make things", from the sense of wonder that comes from looking at "something" and thinking "hey, I made this".

Luckily, despite the neigh-mystical nature of "making things", all those skills can be learnt. You can't learn the passion, but you can learn enough to be useful. Designing and building a simple web-app is attainable for pretty much anyone, and a huge plus as an entrepreneur.

4. Measuring things

As Eric Ries puts it, entrepreneurship is a management science. And, like both science and management, it relies on being able to measure the right things and draw the right conclusions from those measurements.

Understanding what to measure, how to measure it, how to apply statistical (or other) analysis techniques to it to figure out what it means - all of these are very useful startup skills. If you completely lack them, you will be at a disadvantage in building any kind of business.

5. Communication

Entrepreneurs all need to be at least competent communicators. Communication can take many forms: written (via blogs or even emails), in person (presentations, pitches, networking, etc), vocal (on the phone) or even visual (diagrams and designs). All of these areas are important. Being "world class" at these skills is not essential, but a baseline level of competence is required. An entrepreneur who cannot give a presentation, write a good, sharp email, or close a sale on the phone, will be at a disadvantage.

6. Management

Eventually, most startups end up needing to employ others to achieve their goals of rapid growth, whether directly or as subcontractors. Some may think that subcontractors manage themselves. Those people are in for a surprise. Management is hard to learn, perhaps the hardest on this list, particularly when it comes to managing other people - and yet most entrepreneurs don't think they need to learn it! Management mistakes can cost as much as recruitment mistakes, if not more.

Management skills are also essential early on, when the startup is made up of only founders. A full-time manager would be a waste for a pair of hackers, but at least one of the two should be thinking of where the project is headed, setting goals and milestones, considering whether the team is working well together, and fixing process and people problems before they become too painful. That person is, implicitly, operating as a part-time manager. If they suck at it, or don't do it at all, the business will suffer.

[ More details ]

7. Recruitment

Management (the people kind) and recruitment go hand in hand, in that you can only really recruit with discernment once you have enough management experience to recognise how someone will be to work with. The point when you need to bring more people into the company because there's just too much work is not the ideal time to learn recruitment, particularly since most corporate jobs offer ample opportunities to get involved in recruitment.

Being able to recognise talented people with the right work ethic, and to convince them to work for you, is a crucial entrepreneurial skill once the business picks up, and early on, it cannot be outsourced or delegated to anyone.

8. Marketing, branding and PR

I've lumped these three together because they all relate to projecting the image of the company and getting people to hear about it and care about it. All startups have a brand, whether they know about it or not, and those founders that know how to present their business with the right "branding" will typically do better than those who don't.

Marketing and PR, the ability to get people to give a damn about your product and to come check it out and to trust you, are equally important for many kinds of businesses.

9. Networking

Some people would call this an activity rather than a skill, and they may even be right. However, having "networked" for a number of years now, and having observed both skilled (e.g. my cofounder, Paulina) and unskilled (they shall remain nameless) networkers in action, I believe there is enormous variation in the amount of "value" that networkers will get out of a meetup, and that variation is directly tied to skill.

Learning to network is not hard, but it takes practice and perseverance and a deliberate approach to constantly push yourself out of your comfort zone.

10. Research

There are truly incredible amounts of data available on the web. Most of that data is useless, but hidden in these mountains of straw are the needles that point the way for your business to go.

Being able to squeeze the right information from the web (and other sources) on demand and efficiently is a fantastically useful skill for any entrepreneur. And, like all others, it can be practiced.

11. Financial control

The ability to keep your business's cash above zero is a fundamental and often neglected entrepreneurial skill.

A startup CEO has three key responsibilities: setting and communicating the company vision, recruiting and retaining a great executive team, and making sure there's cash in the bank. Everyone gets very excited about the first two, but the last one is equally important.

In an age when most people live with humongous credit card balances, financial control is far from a given. If you don't know how to keep your own cash flow positive, chances are you'll screw up your business's too - with far more dire consequences.

Financial control for a business also requires an understanding of accounting, taxes, and the legal options for dealing with bad payers.

12. Fundraising

Depending on your perspective on business, investors, bootstrapping and so on, fundraising may be either the most essential skill of all or complete anathema. I myself prefer not to have to worry about investors. However, being able to raise money (from both private and public investors) if you decide it's appropriate for your business is a valuable business skill.

This is hard to learn in any other way than by doing it, though some elements of it can be learned separately.

In conclusion

This is a lengthy article (sorry about that) that will turn into a lengthier series of articles. Hopefully, they can provide a path for new or would-be entrepreneurs to make up for the skills gaps which they naturally have when first arriving "on the scene". Even knowing all those skills won't guarantee success. However, being competent in all these areas will certainly increase your chances of achieving some form of entrepreneurial success.

If you have other suggestions, please do let me know.

Update: Some people are suggesting that "persistence" or "willingness to take risks" are more important skills. Whether they are more important or not is debatable, but what I'll argue without hesitation is that they are not skills. So many articles are focused on character traits that correlate (or not) with entrepreneurial success. This article is about skills: things you learn, practice and get good at, not things you are born with, or which are properties of your personality.


Is your MVP really an MVP?  

Anthony Panozzo argues that most of what entrepreneurs calls "an MVP" is really a "version 1". Instead, an MVP is a tool to test assumptions. If you're not testing specific hypotheses, you're not doing an MVP.

So here are my new question for MVPs. If someone says they intend to “build an MVP” (the build part itself might be a tell), I am going to ask:

  • What are you trying to learn with this particular MVP?
  • What data are you collecting about your experiment?
  • What determines the success or failure of the experiment?

It's worth reading the article if you're unclear on this point.

Public speaking for normal people  

Public speaking is a fundamental entrepreneurial skill. If you can't do it - you should learn to do it.

Tragically, many people come out of the European educational systems with little or no public speaking experience, not even in front of their classrooms. By contrast, in America, most children are regularly forced to do "show and tell" or other classroom speaking activities, which eventually takes away much of the fear of public speaking.

Ultimately, the only way to get over your fear of public speaking (if you have one) is to do it, repeatedly, until it goes away. One place to do so is Toastmasters, a non-profit organisation which has chapters all around the world.

However, practical tips are also welcome. Here are some tips from Jason Freedman. Summarised:

  1. Have a standard "routine" that you do before very speech, that gets you in the right frame of mind.
  2. Do not use powerpoint - if you do, have only a few words per slide and don't look at the slides.
  3. Pick two people in the audience and speak to them.
  4. Don't worry about your "Ums" and other filler words/sounds.
  5. Don't memorize your talk or, even worse, read it out.
  6. Practice in front of real people, not alone.

Read the whole article here.

How to develop your fund-raising strategy  

Mark Suster produces another one of this trademark, long-but-packed-with-info articles, this one about fund-raising.

Mark presents fund-raising as sales, and offers a whopping 13 mini-articles about every aspect of achieving this:

  1. Identify the right target investors
  2. Determine how to get access to them
  3. Meet early
  4. Meet in person
  5. Avoid the dead times in the year when no one raises funds
  6. Have a narrative / make it simple
  7. Create a sustained campaign
  8. Lobby - get referrals
  9. Don't neglect your other duties
  10. Test interest
  11. Take appropriate risks
  12. Understand the importance of marketing
  13. Create urgency

I'm not a fan of raising investment unless you already do know what you're doing, as I've discussed before, but if you do feel ready to go the funded route, this article is gold dust - a bucketful of it. Bookmark and read at leisure.

Terrifying uncertainty  

Jason Cohen:

So how do you tell the difference between the chaos that leads to unthinkable success and that which leads nowhere at all?

I’m not sure you can.

and:

The fact that you’re in over your head, that you almost cannot will yourself to continue, that you’re completely in the dark, that you’re working yourself to an early grave, that you seem to slide two steps back for every one forward, that nothing’s ever good enough, that that your friends and family can’t understand why you’re turning yourself inside out with no apparent progress, that you yourself doubt whether you’re even capable of this…

These things don’t mean you’re failing. It’s always like this, until it isn’t.

This is one of the concerns that Eric Ries tries to address with his principles of Innovation Accounting and Validated Learning, which make the learning more tangible so that even if the graph is flat, you have some way to measure progress. That said, it's true that there will always be strong elements of terrifying uncertainty in any startup.

Being able to sleep at night despite all this uncertainty is one of the founder characteristics that is very hard to train up. Either you're comfortable operating with minimal information, or it drives you nuts. If it's the latter, stick to a job.

How to get actionable data from Google Analytics  

Another good post by Kristi Hines from the prolific KissMetrics blog. This one explains practically and in some detail how to set up Google Analytics goals and funnels and use them to learn about your website's conversion. This is quite an unexpected blog post, considering that KissMetrics sells a competing analytics solution, but the article is solid, clear and easy to follow. If you were thinking of adding funnel analysis to your Google Analytics but didn't know how, read this.

Premature design optimisation  

Here's a great article by Des Traynor, making the point that you have to get the basics (whatever the basics are in your context) before working on the polish, but also the counterpoint that in some cases, polish is part of the basics:

The lean startup movement advocates as little work as possible before validating your business model. Lean is one of those words, like Agile, that are chosen deliberately because they set-up a false dichotomy. No one wants to say they’re a Fat Startup. Or that they do Clumsy Development. So everyone is now adopting the Lean Startup® Methodology.

Lean is often misinterpreted as “don’t waste time on polish“. Sometimes the polish is all that counts. You can’t judge the market for a five star hotel by building a seedy motel and seeing how well it performs. In some cases the quality of product is more important than the type. When the interface is the killer feature, it’s tricky to go “lean”. If your belief is that people will appreciate a fully polished beautiful to-do list, you can’t show them a scrappy UI to test the market.

I think there's a very slight straw man at work there, in that the alternative to great design isn't appalling design, but slightly less great design. If you have a decent designer, they should be able to put together something much better than the wGet UI Des presents as a "lean design", in a relatively short time.

Going from good to great is still a lot of work, but perhaps it is possible to partially test the market for a 5-star hotel by leaving the golf course and the spa till later.

Final point: Lean doesn't advocate putting out crappy designs, it advocates doing the minimum that works to test your hypotheses. If design is indeed necessary for the assumption you're testing, then it should certainly be on your to-do list.

How to: track your expenses (UK)

Last week we covered how to deal with your corporation tax. One of the things I mentioned is that as part of your system to deal with CT, you need to track expenses correctly.

There are a million different systems to track expenses, ranging from "stuff all the receipts in an envelope and get a bookkeeper to track them" to using accounting software and tracking everything yourself. It doesn't really matter which system you use so long as you're comfortable with it and you know that it works and how it works.

At the end of the day, as the business's founder, you are personally, legally responsible for your company's record-keeping. If you screw it up, you can't turn around and blame someone else. You're the Director, it's your fault, and "not knowing" is not considered an excuse. If the bookkeeper screws up, it's still your fault.

Keeping track of expenses is really not hard at all, so if you do screw it up in a big way, it is really through your own sloppiness. Read this article, and this hopefully won't happen.

Many books about accounting (and many accountants) end up recommending a horrendous, antiquated system like SAGE or QuickBooks. This is often because they're written by accountants who are familiar with those systems and would rather everyone used them so they don't have to learn new systems. That's fine for the accountants, but from personal experience, most of those legacy accounting systems make me prefer to stick a sharp pencil in my eye rather than launch the horrible software.

What I'm going to recommend should work until you get to the stage of having a few (up to 10 or 20) people on (profitable) payroll - a small, profitable company. If you're VC-funded and you've hired 50 people, you probably won't be allowed to do this, but for most people bootstrapping their own business, or who have taken a small amount of seed capital, this system will work and will be relatively little effort.

My expense tracking system is based on a web-based product called FreeAgent (referral id included). It's slick, it's modern, it can track transactions and receipt scans together, and it's cheap (if £30/m breaks your bank, you have other issues). I don't normally recommend that people take on fixed, recurring expenses early on in their business's life, but this is one that is worth spending money on right away so your accounting is entirely sorted out from day one.

However, a tool is not a solution all by itself. "Buying FreeAgent" is no more a solution to your expense tracking than "Buying FogBugz" is a solution to your bugs. People, processes and tools, in that order, as I've said before.

So let's look at those three aspects of a possible expense-tracking system using FreeAgent.

1. People

What people do you need involved in solving this?

Well, when you're by yourself, it's just you. And yet, even then, you might find it helpful to get a virtual secretary to spend an hour a week doing the manual, boring part of the work (linking receipts to transactions), so that it happens even when you're distracted or simply can't be bothered. We (GrantTree) pay £30/hr (inc. VAT) to a freelance personal assistant to spend one hour a week doing this (I'm happy to recommend her if you email me). Even (or perhaps especially) if you're by yourself, you may wish to hire such a person to get rid of the drudgery. However, I recommend doing it yourself for at least a month or two so you fully understand what's involved.

However, even with a PA doing the reconciliation work, the rest of your team (that includes you) needs to be committed to the idea that expense tracking is not optional. If you don't scan your receipts in time, there's nothing your PA will be able to do for you.

So, the "people" side of this process includes anyone who's capable of paying for things out of the company account, or of charging expenses to the company. They need to understand that having messy accounts is not acceptable, and so they need to be diligent about scanning invoices and receipts correctly and on time so that they can be reconciled with banking transactions without too much fuss.

2. Process

This is the way GrantTree's expense-tracking process happens, which you can use as a model for your own expense-tracking.

First of all, all business expenses are, ideally, made on the company card. This ensures that they're not missed in the reconciliation. Of course, you should only give a company card to people who can be trusted not to misuse it - but even if they do charge inappropriate expenses in, you can always deduct those from later payments. FreeAgent supports tracking this type of mishap.

The second step is that any payment should result in a receipt scan in a pre-agreed "new receipts" directory. This is actually very easy to do without fuss, by using an iPhone app called MobileAgent, which costs a whopping £2.99. Go on, treat yourself. What MobileAgent allows you to do is to point to a DropBox folder and scan receipts directly into there, on the move. This means you don't need to keep paper receipts. Hurrah! So, every person with access to the company bank account should be scanning receipts into there as soon as possible after making the expense. MobileAgent will include the date in the file name, so that it's easy to reconcile later.

Thirdly, on a regular basis (e.g. once a week) you should import expenses from your online bank account interface into FreeAgent. So long as your bank support export in QIF format (which pretty much all of them do), you'll be able to do that.

This import needs to happen before the reconciliation (done by yourself, your virtual PA, or someone else), which is the fourth and final step. Once a week, your PA should go through all the unexplained transactions in FreeAgent, and match them with receipts in the common folder. Unless you've got a lot of transactions, this should not take more than one hour a week.

As part of this final step, any transactions that can't be explained, and any receipts that can't be matched, should be highlighted to the people with access to the business card. Since we're still only a week away from the oldest unexplained transaction, it should be easy to figure out what happened. What you don't want is a situation where an expense from 3 months ago is unexplainable. That sucks, and ends up causing you worry, especially when you need to file a VAT return.

Does this process need to be weekly? Not necessarily, but the more regular it is, the less problems you will have. I recommend weekly, but it's up to you.

If you just implement those 4 steps, your expenses will be tracked properly so that you are well prepared to file correct accounts. There are other things to think about too, like capitalisation, categorisation, and other such concepts, but those are things to know rather than things to do. The process above can remain the same for quite a long time into the life of your business.

3. Tools

We've already covered this, but basically the tools to support this process are:

  • an online accounting tool (FreeAgent, Xero or KashFlow - any of them should do);
  • a mobile app that can scan receipts as they happen, either directly into your accounting system or into DropBox; all three of the solutions mentioned above have iPhone apps.

Final notes

Part of the process of reconciling expenses is to categorise them. That's a whole topic in itself, and I'll write about that next week. Capitalisation is also an important concept for larger equipment expenses.

The process we've outlined will put you in a good position to ensure that you always file your VAT returns correctly and without fuss. VAT is a whole topic in itself, so it will also be covered in a later article.

If you make expenses by cash or on a card that doesn't belong to the company, you can still enter those. Every person who can make such expenses should have an account in FreeAgent, and they can then create the expense manually in the system, or with MobileAgent. FreeAgent will automatically track who is owed how much for expenses, and how much of those expenses has been paid back to the user, which is a really nice time-saving feature. These types of expenses should be done just as promptly as normal expenses, by the way, for the same reasons.

The key take-away from this article should not be that you need to follow my system to the letter (or even at all). This is just an example of a system that works. Tailor it to your own business, adapt and evolve it as you gain your own experience and opinions on the topic. The key objectives of the system are that every invoice or receipt is explained promptly and correctly, and with a minimal amount of time wasted running around trying to remember what happened 3 months ago. Whatever works for you to achieve that is probably the right system for you.


The series so far:

1. How to register a company in the UK

2. How to: deal with your Corporation Tax (UK)

3. How to: track your expenses (UK)


Idea reach and the cofounder myth

Last week's linked post "stop looking for a cofounder" generated quite a bit of response on HN, much of it around the idea of using freelancers to build your startup. People seemed to think that I advocated using subcontractors to build high-tech startups.

The answer to this is a concept I call "idea reach", which is essential for any new entrepreneur to understand, especially if they think they need a cofounder.

The ideas within your reach

Idea reach represents the landscape of ideas that are within your reach to implement. On the multi-dimensional mental map of startup ideas, it is the ones that are close enough to your current location (determined by your knowledge, personality, experience, etc) that you can actually get there (with the execution ability you have - determined by your resources and skills) and implement them. When evaluating which ideas to work on, you should always consider this concept. One of the reasons why so many business cofounders are "looking for technical cofounders" at the wrong time is because they fail to understand idea reach.

There are many bad, good, and great ideas out there. When deciding which one to work on, it's not enough to evaluate whether the idea is viable in the abstract. Whether you personally will be able to execute on it is just as important.

Examples

Here are some simple examples.

Let's say you had the idea of using popularity to rank webpages, back in the late 90s, but you have no technical background. You don't know programming, you just know how to use a web browser and create a Geocities page, but you think that search engines could be done much better.

This is a brilliant idea, and after you explore it (using, for example, the lean methods which only evolved 10 years later, because you're a visionary), you decide that this is worth pursuing, it has a lot of market potential. And you would be right - that idea turned out to be one of the biggest ideas of the decade, spawning the extremely successful Google.

However, starting with no technical knowledge, implementing Google would not be within your reach. It's a great idea for somebody else, someone who has the technical chops to implement a highly challenging technology project like the Google search engine. It is not the kind of idea where you can just put down a few hundred thousand dollars (assuming you had them), hire a bunch of programmers, and get them to make it happen.

Another, even more obvious example: let's say you have an idea for a phone better than the iPhone. Let's assume it's a great idea, and you even have the skills in "technology" to implement it (yes, I know that it's laughable to think that a single person could do all that today). That's still not within your reach, however, because developing an iPhone-killer prototype is far from sufficient to compete with the behemoths operating in that market. You need logistics, manufacturing deals, negotiation leverage, great marketing, and so on. There's no way you will have access to that without first building a large company. This idea is obviously out of the reach of any new entrepreneur.

Here's a more subtle example: let's say you know very little about software, but you are a highly experienced project manager and you think you can design significantly better project management software. Depending on how complicated this software is technologically (and to find that out, you'll have to trust someone technical to tell you) this idea may be just within your reach (with some hired assistance), or just out of your reach.

If the tool turns out to be relatively simple (bearing in mind that not everyone is trying to build the next Google), and if, as the founder of the company, you have the funds (from whatever source) to invest in it, it is conceivable that an early version of this project management tool could be implemented by freelancers, paid employees, or a combination of the two, without you, the founder, having to be technical. So long as the idea is not too technically complex (and a lot of great business ideas aren't very complex technologically - e.g. Groupon), you can make up for your lack of skill by spending money.

If it turns out to be very complicated, the idea is simply outside of the reach of a non-technical project manager. It might (or might not) be a great idea, but it's not the right idea for this founder. Instead of looking for a technical cofounder who will make up for that huge hole in your skill set, find another idea that's better suited to you.

Finally, if the idea is not too technical, so it is possible to hire people to do it for you, for a sum anywhere from a few thousand bucks to a million, but you don't have that money available, then no matter how simple the idea may be, it is out of your reach, because you do not have the resources to execute on it. At that point, you shouldn't "go looking for a cofounder". Instead, try to raise the capital (likely from your own savings) so that the idea comes within your reach. If you can't raise the capital (because no investor believes in you, or because the idea is just too expensive), this idea is outside your reach. Do something else.

The problem with looking for cofounders

The way many people end up looking for cofounders is that they spend a lot of time thinking through a lot of ideas, and finally settle on the "best" idea that seems not too far out of their reach. Very often, however, that idea is still quite far out of their reach, usually because they lack the technical skills to implement it themselves and they vastly underestimate (or don't bother estimating at all) the complexity of the idea.

So then, having had the idea already, they go and look for a "cofounder" to make up for the fact that this not the right idea for them. Sometimes, they find that person. Sometimes that even works out ok. But generally, it doesn't work, because the people who make good cofounders are either unavailable, or uninterested in your idea, and so the chances are anyone you do convince to join you isn't worth having as a cofounder in the first place.

Extending your reach

This, however, doesn't mean that there's anything wrong with having cofounders. Cofounders provide many things, including motivation, more dynamic ideas, and even additional reach. If you know someone who is great at building physical widgets, and you're great at building software, and you're both looking to start a business at the same time, it can very well make sense to team up and look for an idea that's within the reach of both of you as a team, rather than individually. Chances are, this idea will have less competition, because fewer founding teams will have those combined skills.

"Looking for potential cofounders" is fine if your aim is to meet cool people whom you may want to work with later if the right opportunity comes along. Having great people in your network extends your reach because if you both happen to be free at the same time, you can pool your resources and execute on more difficult ideas.

But don't go looking for a cofounder to enable you to implement an idea, which you've settled on already, that's outside your reach. That's not a cofounder, it's an employee who's executing on your plan, and should be paid with money. And if you can't afford them, or if the idea can't be implemented by hired guns, then find another idea. It's not like there's a scarcity of ideas out there.

Swinging for the fences

One last thought. A lot of people will respond that many highly successful startups implemented ideas that were outside their reach, and succeeded anyway. YCombinator has made it a successful business model to take founders and virtually catapult them far away from their idea reach, and succeed anyway through a combination of exceptional founder selection and world-class mentoring.

That's a fine business model for YC, a great thing for the world to have, and if you're one of their selected protégés, you should definitely go for it and give it your best. However, this type of proposition is always, naturally more risky. If you can afford to fail without too much damage, swinging for the fences may be the right strategy for you (see this article too). If, however, you've got very limited savings, and failure will propel you back into a corporate environment and a job you hate, then it might be better to focus on achieving survival and comfort first. That's easier with an idea that's within your reach.


The "Army of One" entrepreneur

What's the best strategy to get from having no startup to having one that provides you with income?

Is it to find the best idea you have, focus all your energy on it, and make it work at all costs? This seems to be the standard mode of operation for most new entrepreneurs. They'll wait until they have an idea that they can pursue and that seems worth pursuing, and then pour all their energies into that idea. If it works, great. If the idea happens to be a stinker, they'll probably fail. Some might be lucky enough to know that they should validate the idea before pouring a year of development effort into it, and so find out the idea is not so good before all the money is gone.

Once upon a time, it used to be that starting a company and building a new product was a big and all-consuming affair (notice I'm not even talking about cost). If you were Henry Ford and you wanted to try out your new idea about car manufacturing, there was no way to do that without pouring most of your time into that one idea. Steve Jobs and Steve Wozniak had to put their heart and soul into building Apple for it to stand a chance. Granted, Woz also worked at HP at the same time, but it took more than 1 full-time person's attention to get Apple to the point where its potential for success was validated. Even today, many such businesses are still started. Dropbox, AirBNB or Spotify are not the kind of business that you can start with only part of one person's attention. You need several people to dedicate all their time to proving the idea, if you want it to stand a chance.

But is that true of all startup ideas? Clearly not. There are many ideas which you can validate very cheaply and without pouring all your time into them over a long period of time. They may not all be great, world-changing, visionary ideas, but they are still ideas that serve a purpose, fulfill a need, and have the potential to create value for both the founders and the customers.

Is that even true of most startup ideas? Do most startup ideas require a large up-front investment in time to validate that they could be good, worthwhile ideas?

The ever-shrinking minimum viable niche market

As I've argued before, the cost of starting a startup is always decreasing, or rather, the amount of stuff you can do for a given amount of money is always increasing. Let's consider a random niche "X", and let's assume it's a niche that is real (i.e. there is actually a need that could be served and that people would pay money for). 10 years ago, the process of validating the market for X and building a product to serve it would cost a large chunk of money and take all your time for a year.

Today, addressing the same niche would take considerably less money, because of all the tools and methods available to make software development more productive. Even validating the need would take less in both cost and effort, because of all the communication tools at our disposal. Moreover, that niche is probably somewhat bigger today than it was 10 years ago, because there are simply more people on the internet.

Ten years ago, the correct choice might have been to avoid niche X and find something bigger. Today, niche X could be served with a positive return on investment relatively quickly (if you can execute).

I propose that there are countless such micro-niches becoming viable every week, niches that were previously unviable but which are now worth having a shot at if you're looking to make a regular income by building software. These ideas will not make anyone a millionaire, but they are viable to build a sustainable small business that will free the founder(s) from the shackles of corporate work, and perhaps enable them to take a more risky moon-shot on their next venture.

A better time investment model

Some time ago, Chris Yeh wrote that impatience kills startups, and I replied that patience kills human beings. From an investor's point of view, it makes perfect sense that you should dedicate yourself body and soul to a single idea. And in fact, I would argue that you should not raise investment unless you are ready to dedicate yourself to that idea for the next 3-5 years.

However, when it comes to finding an idea to work on, there is no reason to work on a single idea at a time. And, if the ideas are small enough to be implementable by very small teams in a handful of months, there's also no reason why you can't build several of those ideas at the same time (or in quick alternation throughout the year).

If you want to maximise your chances of running a successful startup, where success is defined as achieving at least the "survival" level outlined in this article, and ideally the "comfort" level, it makes a lot more sense to invest your time in many ideas at the same time, test all of them (in parallel or one after the other) and then pursue the one or ones that are most promising.

Some people may accuse you of not committing to your ideas, and that's exactly what you're doing and what you should be doing. Given that ideas can be tested, explored, and sometimes built out into profitable businesses without committing to them to the exclusion of other ideas, committing to a single idea is irrational unless it's the kind of idea that simply requires full-time commitment. And if it is that kind of idea, it's inherently more risky - perhaps you should cut your teeth on a less risky idea.

If you are multi-skilled enough to be able to implement all startup aspects by yourself, you can then become an "army of one" entrepreneur, building multiple profitable products in parallel, turning the "several people work full time on a startup" equation on its head - and getting wealthy in the process.


How to: deal with your Corporation Tax (UK)

Following on the success of last saturday's post about how to register a business in the UK, I've decided to switch the "simple and practical How-to" to Friday. So, today, let's look at how to make sure you don't fail at Corporation Tax and end up with big fines, in jail, or worse: barred from running a company again.

My experience of the matter is both as an observer - seeing how others do it - and personally, both succeeding and failing at actually getting this right.

1. Make sure you understand Corporation Tax

The biggest problem with all these accounting concepts is that because they sound like accounting, people think an accountant should handle them, and they don't want to learn about them. That's a mistake. First of all, unless you're doing some very complicated stuff (in which case you should have a competent accountant or CFO advising you), CT (and VAT and PAYE) are simple. They're a pain in the ass, but they're simple.

Effectively, Corporation Tax is all about profits. The UK government taxes you based on... well, everything they can, and one of the obvious numbers to tax is your profit. Whether that's the right approach or not might be debated, but it's the reality.

Let's say your turnover is £100k (meaning you are taking in £100k of revenues each year), and out of that you're paying £50k of costs. That makes your "taxable profit" £50k. At a CT rate of 20%, your "tax burden", as accountants like to call it, is £10k. That's it. That's how you calculate CT, fundamentally. Profit x tax rate = CT liability.

2. The Corporation Tax rate

Is the tax rate 20%? It depends on your size and the year we're talking about. The full rates are listed here. If your profit is less than £300k, which is likely to be the case if you're reading this article, your rate is just a straight 20%. If it's above £300k, then it progressively rises to 26% - but this upper level is dropping each year.

You can get the rate to be effectively lower, by using various tax breaks... but we'll get back to that later.

3. What about losses?

If you're not making any profit, then you don't have to pay any Corporation Tax. In fact, any losses you make this year can be offset against future years.

So, if you made a £50k loss last year, and you make a £50k profit this year, you can offset last year's loss against this year and not pay any CT this year either. Such losses can be carried over from year to year until you've used them up.

4. Keeping track of expenses

The main difficulty that any new entrepreneur faces with respect to correctly calculating their CT is simply keeping track of all the expenses. This is the kind of thing that really hurts if you don't do it properly right away, particularly if your business is quite active.

Unless you're only planning to have a few dozen transactions per year (which was the case for one of my businesses), keeping track of expenses can become a nightmare. One of the reasons for that is that you not only need to keep track of the numbers, but also the receipts.

HMRC generally states that it takes a "lenient" approach investigating small businesses. They understand that small businesses often don't have the right systems and advice in place to do their taxes perfectly, so as long as you look competent enough and you don't seem to be defrauding them, they will probably not be bothered about small mistakes here or there. However, if your accounts are a total mess and it shows (for example because amounts don't add up), you will draw attention that could end up costing you a hell of a lot of stress and time.

Having tried both manual and automated expense systems, I come strongly in favour of the latter. I use FreeAgent (referral link included), because the interface is simple and easy to use, it automatically generates all the tax reports I need, and it keeps track of receipts in the system itself. Other alternative systems I looked at were KashFlow and Xero. In this day and age, I would not consider offline accounting systems, or even uber-complicated ancient relics like Sage, to be appropriate for a small business.

We'll cover how to classify expenses, and how to systematise expense-tracking so it's not a nightmare chore, in a later article, but for now, it's enough to say that you should keep track of all your business expenses in whatever system it is you choose, so that you can:

  • accurately calculate your profit for the year; and
  • justify the calculations if HMRC asks - including being able to produce receipts (electronic or paper) if asked.

5. Filing the Corporation Tax return

The first thing to note about Corporation Tax is that it is only due 9 months after the end of your financial year. You may decide to file it earlier (for example to collect some tax credits), but you don't have to. So, as long as you keep records properly, you don't need to worry much about CT for the first 18 months or so of your business.

Then again, you won't know if your records are proper until you start using them (for example to get your CT filed). So it might be worth filing a bit earlier, especially if you're unprofitable anyway, to properly "test" your expense-keeping system, and make adjustments if you find it wanting.

The form which you're looking to file is called CT600. It can be downloaded from HMRC's website after you log in and "Enroll for Corporation Tax online". This, like all of HMRC's online processes, takes a while, so don't leave it to the last minute.

In an ideal world, HMRC would have a nice, secure online form. And that's what they claim they have. The reality is, HMRC's so-called "Online filing facility" is a gargantuan PDF file that can only be opened with Adobe Acrobat Reader and which takes a whopping 15 seconds to open up on a Macbook Air (Adobe Photoshop takes less than 5 seconds), and which you'll need to set up custom SSL certificates for. It's insane, it's stupid, it's the way HMRC decided to make your life harder. That doesn't mean you should pay an accountant £1,000 just to handle Adobe Acrobat Reader for you and fill in some fields.

If you're using something like FreeAgent for your accounting, you should be able to generate all the key figures via one of the reports there, and just fill them into the form, and hit submit. It will still take you an hour or two because Acrobat Reader is so slow, but it's a pretty straightforward process.

It's worth adding that you can (and should) also submit your accounts via the same PDF (and various other attachments), but we'll cover accounts in another article.

6. What if I'm late? What if I can't afford to pay?

If you're a little bit late in filing, ok. But don't wait any longer! If you're very late, HMRC will fine you, with the fines growing if you keep ignoring them.

You should always be able to pay, because if you use a proper accounting system and keep it up to date, it will tell you how much you're going to owe to HMRC at any point, and you can make sure not to touch that money. I like to put it in a separate account so it can't be spent (I do the same for VAT).

If you can't afford to pay because you screwed up your cash flow (I've been there and done that, before I learned better), then what you should not do is ignore the problem and hope it will go away. Pick up the phone and ring up the number on those HMRC reminder letters. Your mileage may vary, but in my experience, so long as you make a case for why you can't pay now (even if it's basically your fault) but you will be able to pay as soon as such-and-such invoices are paid to you, they will take a lenient attitude. I think the general idea is they have no interest in forcing you into bankruptcy if there's a reasonable chance that you will pay. They'd rather have the money. Try not to do this every year, though. Also, if you're reading this from another country, don't count on this leniency. I hear that Holland is more "fuck you, pay me", for example.

That's it for today. I hope you find this as useful as the previous article.


The series so far:

1. How to register a company in the UK

2. How to: deal with your Corporation Tax (UK)

3. How to: track your expenses (UK)


Stop looking for a cofounder  

Sacha Greif offers some tips about why you shouldn't look for a cofounder, and try using freelancers instead. Pull quote:

Hiring a freelancer is not that expensive. You can hire someone for a month for a couple thousands dollars, and a month is plenty of time to build a prototype if that’s all you’re doing.

If you say that you can’t manage to come up with even $3000 or $4000, that tells me two things: first, you don’t have any monetizable skills, so you don’t sound like a very good person to build a startup with.

Second, you’re not very resourceful, and that doesn’t play in your favor as a startup co-founder either.

Sacha also goes into several reasons why freelancers are a better thing to look for, if you need help, rather than cofounders.

I think Sacha is spot on about those reasons, but he's missed one that trumps them all:

I don't think it's actually possible to "look for a cofounder", especially not if you already have a project under way. As I've pointed out before:

...networking to find a cofounder is like going to a party to find a wife. You might meet lots of interesting, and potentially eligible, partners while out networking/partying, but those who respond favourably when you mention what you're looking for on the first "date" are probably not the ones you want to marry.

Hanging around places where you might meet potential cofounders is great. Building relationships is great. Working on projects that you're both passionate about together is great. But going out networking explicitly to try and find a cofounder is misguided and will probably cause you trouble.

If you've settled on the idea already, it's time to get early employees, not cofounders. They should be paid. If you can't do it without getting other people's help and you have no money to hire others, then this is not the right idea for you - find one that's more within your reach, or build relationships with potential cofounders and find ideas together.

What you should almost never say is "I have an idea, I should now look for a cofounder".

Update: Also relevant, via Slimy:

A co-founder is not what you need, unless you already have one, and you have as good a relationship with them as the best relationship you've ever had with anyone in your life. If you KNOW you're not going to have a problem, then great.

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