Volume Number: 20 (2004)
Issue Number: 1
Column Tag: Programming

Starting a Business

by Chris Kilbourn

Life Change Ahead

Starting a business will change your life. How it will change is up to you.

You might be starting a business to become rich or to create a better world. Maybe you want to be in control of your schedule instead of being at the whim of some pointy-haired boss. Perhaps this is not your first go-round on the entrepreneurial ride, and you are hoping to finally achieve success this time around.

Stop for a moment and think about what your success will look like.

Are you pleasantly retired somewhere sunny with a drink in your hand while having your shoulders massaged? Are you donating the tons of cash you have earned to your favorite charities? Are you standing on the floor of the New York stock exchange ringing the opening bell on your initial public stock offering? Are you closing up shop after another great day at the office?

No matter your goal, it should be what is driving you to start a business, and it should be a clear goal. Beginning an enterprise is a huge undertaking that will commit and preempt your time and energy for months - if not years. If you are still a bit hazy about why you want to start a business, don't.

In this month's article we will examine in more detail the dreams and realities of starting and running a business, look at goal-setting, explore ways of integrating your business into your life, examine the larger hazards that you are likely to encounter as well as explore some of the rewards of business ownership.

Your life will change significantly after you start a business in ways intended and unintended. But if you know beforehand what you want from your business and what it will want from you, the inevitable hard knocks to come will land only glancing blows upon you instead of sending you down for the count.

Myth #1: Business owners are rich

Unless you are independently wealthy, you are working in order to earn money to pay for living expenses - and so are the vast majority of business owners. For some reason, many people seem to believe that if you own your own business, you must be rich or at least well off enough to only be working at your business for 'fun.'

The American Dream, and the technology industry in particular, perpetuate this myth by lionizing its most successful entrepreneurs: Jobs, Gates, Dell, McNealy. They have earned their accolades. By only focusing on them, though, you lose sight of the thousands of people struggling in their businesses day-to-day, propped up by hope and personal credit, desperately trying to make that next sale to cover payroll.

Or to pay their mortgage.

Business ownership reality is that money is perpetually tight, and depending upon your business, it can attach to your personal finances like a leech. I have yet to meet an entrepreneur that has not been through a period of personal financial crisis due to one of their businesses.

The harsh reality is that most businesses fail because they run out of money and that before these businesses finally run out, the owner has pumped in many of their own dollars. In no small number of cases business owners are forced to declare personal bankruptcy when their businesses fold, having pledged personal credit guarantees to their creditors that they no longer can afford to pay.

In my own case, at one point in time I was juggling around $500,000 worth of personal debt and credit guarantees. It made refinancing a car loan an extremely interesting exercise once. This is par for the course. Be prepared to have your personal credit record end up in a strange limbo land if you decide to self-finance your business.

The entrepreneur's dream is that there is a large payout somewhere along the line. Either as a steady cash cow like software upgrades or as a big hit like a killer piece of hardware or the sale of the business. For those of you starting your business for the big payday, realize that there are only two ways to get that money: as cash flow out of the business or by selling the company outright. Your business model and plan will guide you as to which will be appropriate. We will cover this in our next column.

Business ownership: lounging by the pool with a martini and a cigar watching gardeners trim your hedges and clip your grass while you try and decide between Switzerland and New Zealand for your next ski vacation. Not.

The reality is that business owners are likely to be working 16 to 18 hour days and likely have not had a vacation in a while. In my own case, I did not have more than three continuous days off in five years and I worked close 70 hours per week for the first two years with some 100 hour weeks thrown in for good measure.

Businesses require huge investments of time, and the initial startup phase will require the most. There are business plans to write, people to call, office space to secure, telephone lines to order, staff to hire, equipment to secure, etcetera, etcetera, etcetera. Then you still have to make time to do the work of your business. What you will have is more flexibility over your own schedule. Unless you have business partners, there will be no one to tell you that you are late to work or that you cannot take a morning off to play hooky now and then.

If your goal is to start a business to enable to you to have a flexible schedule with more free time for yourself, be aware that it may take several years before your business has grown enough to allow you to delegate projects and responsibilities to your staff, freeing you up to do other things in your life.

It is true that when you own your own business, there is no one person to tell you what to do. What gets short or no shrift in the daydream of working for yourself is that each and every customer of yours will be your boss.

Think about it for a moment. If you are currently working for someone else, that person provides you with your paycheck and directs you in the tasks that you do. Customers also pay you, albeit indirectly, and they can drive what it is that you do on a daily basis.

This mode of work can take some getting used to. Instead of one person that you develop a working relationship with over time, imagine tens, hundreds, even thousands of people that all want you to do something for them and claim a bond on your time. While not a codified law, I have come to believe that there is an inverse proportion to the level of customer demand versus the amount of money being exchanged!

With a myriad of things to do and only a limited amount of time to get them done in, time and project management skills are critical to the success of your business. Working for someone else generally allows you the luxury of not having to worry too much about what work you should be doing and when you should be doing it. If your personal skills are rusty or lacking in these two areas, I would highly recommend taking a class or investing in a device or software that will help you keep track of the things you need to do, and when you need to do them.

For the reality check on this, attend a local venture capital or entrepreneurial event and ask the other attendees about their past failures. Chances are, you will receive an impassioned story about the one (or many) ventures that did not work out for them. Most businesses fail. It is just the way natural selection in the economic environment works.

Many entrepreneurs fail several times before 'striking it rich,' even passing through bankruptcy several times. Stories like these are what fuel the 'rags to riches' archetype.

Success in business is not guaranteed, even with maximum effort. Perseverance is key. Expect that there will be large setbacks. Expect that there will be some failures along the path. This does not mean you should accept a defeatist attitude - on the contrary - keep focused on the goal and keep trying, for perseverance will eventually guide you to where you seek to be.

If cleaning out the company refrigerator because the onion dip went bad or staying up for 72 hours straight troubleshooting balky technical equipment is your idea of excitement, you are going to love running a business!

The myth is that you will be out there cutting deals and changing the world one customer at a time, all the time. The reality is that you will spend most your time in meetings, doing presentations, managing staff, sorting out troubles of all stripes and dealing with the crisis of the hour. Oh, and cleaning the fridge, unless you can afford a cleaning service.

There is excitement in running your own business, but just like everything else in life, the time in between the exciting bits tends to be filled with housekeeping duties and routine tasks that help to create a space for the excitement.

One of the most satisfying things about starting a business is working towards making a dream come true. The funny thing about dreams are that they can crowd out objective reality, blind you to peril, and isolate you in your own happy little world to the exclusion of everyone and everything else. Entrepreneurs immerse themselves into their dream in order to actualize it. If you follow this path, it is important to come back to the real world now and then.

So how do can you tell when your dream is beginning to tip towards a nightmare? If things are going poorly, chances are that friends and family are already sounding a klaxon in your face, attempting to gain your attention. Ignore it at your personal peril.

It will be up to you to do a gut-check to see if the fears and concerns they have about you or the business are real or imagined. In a perfect world, friends, family and lovers will support you with unconditional love and understanding while you pursue your dream.

In the real world, friends get annoyed because you really don't have time to listen to them whine about their golf game when you have invoices to get out, family gets miffed that you missed a birthday because you were working an 80 hour week to get a major proposal out the door and your lover becomes enraged when they realize you have more passion for your business than you do for them.

Somewhere within and amongst the four worlds you all concurrently share, (your dream world, your reality, their dream world and their reality,) there is some semblance of what is really going on, that is both good and bad.

Everyone's circumstances are different but as sweeping general guidelines attempting a third mortgage on your house to pay business bills is bad; trying to figure out how to invest profit is good; missing sunset walks with your significant other in order to compile software is bad; having time to take a three hour lunch with your significant other is good.

Separating large issues from small ones can be tricky though. Is your spouse's concern about money due to a real financial shortfall or have you just gotten around to depositing a check? Are you working too much and becoming less effective as you go or are you getting all sorts of things done that others cannot see?

In any event, communicate with those around you. That includes talking and listening. Remember that what you are doing may be terrifying to even your closest loved ones and that their fear for you can amplify and distort small and large issues.

I will leave it as an exercise to the reader to triangulate their own situation.

OK, now you know that things will not be easy and that you will need to remain vigilant when it comes to avoiding becoming entangled in a fantasy of how things should be with your business. One of the best ways to stay grounded is to have clear and attainable goals.

Before I founded digital.forest, I thought quite a bit about what I was hoping to accomplish. It was time well spent, as it provided me with something to strive for when things became difficult and I was tempted by despair. I set incremental goals that led to a larger goal which I hoped to achieve. By attaining each incremental goal in turn, I secured additional confidence to push forward and look back upon when it seemed like the next step was out of reach.

As an example, one of my personal goals was to have a more flexible schedule. I wanted to be able to take time off when I wanted or needed to and have other people take care of the business when I was not there.

When I first started out, I was a one-man show, so I knew that it was unrealistic to expect that I could just take time off willy-nilly, as there was all sorts of work to be done. In fact, there was so much work, I was regularly working more than 80 hours a week for the first several months of the business.

The incremental goals I set for myself were to ratchet down my hours over the weeks, and to take a set amount of personal time each week to do something non-business. As the business began to grow and I was able to hire my first employee, I was able to off-load some pager duty to her, which allowed me some control over my sleep every other week for the first time in a couple of years.

As the business continued to grow and there were more employees to delegate tasks to, I was able to reach a point where I could take a real vacation and not have to worry about being called back to the office or be interrupted by a telephone call. There were the invariable setbacks when it seemed like I was back to living at the office and working non-stop, but those periods became shorter and shorter as time went on.

It was another year before I could juggle my schedule enough to take the odd day off to go skiing every now and then in the winter. From working insane hours to being able to take a normal vacation and the odd day off took me six years.

Each step along the way, I knew what it was I was working towards, and I always made the next step a little harder but not impossible to get to from where I was at the time.

Some of the other goals that I set for myself were to expand my personal career skill set by learning how to do new things, have the opportunity to meet a diverse group of people and create a profitable business.

Granted, these goals were a long way from say, curing cancer, but none of them were unrealistic, and I have the personal satisfaction of having achieved them.

Spend time thinking about what personal goals you would like to achieve with your business. The more effort you put into this and the clearer they are, the easier it will be for you to articulate your vision to others, and they can be your personal lodestone when feeling a bit lost about the direction of your next step.

Adam Smith's invisible economic hand may guide us to start a business, but the hand has nothing to say about why we work so hard to do so. Reading Max Weber or Ayn Rand might provide us with an insightful glimpse here and there, but in the end they only provide us with archetypes to study and ponder.

Western capitalistic society is deeply committed to certain notions about work. Some of these beliefs are tacit and unspoken, others are common idioms that we take for granted.

Wheel and deal. Nose to the grindstone. Money talks.

In many cases, how you view, approach and perform your work is a reflection of your culture, your upbringing and your values. Some cultures value family time over business time, while another might view work as family time.

No matter your background or beliefs, be sure to ask yourself these three questions as you plunge into your business:

• Is what you are doing meshing with and advancing you towards your goals?

• Are you building in enough time in your schedule for yourself, your family and your friends?

• Are you having fun?

These three questions speak to self actualization, of staying connected to others and to joy. Your answers to these questions will ebb and flow over time. Some times they will be easy to answer and at other times, devilishly difficult.

If you are running a business and are having trouble getting to 'yes' on any of these questions, it is time for you to stop, step back, and re-evaluate what you are doing with your time.

Integrating a business into your life can sometimes be harder work than getting the business off of the ground in the first place. If the business is unduly encroaching into your life, you will need to systematically remove it from the areas into which it is intruding.

Setting clear boundaries between work and personal life should be the first place to start. At one point in time, I was carrying a pager 24 hours a day, 7 days a week and before I went to bed and when I arose in the morning I would check my email for problems that needed to be troubleshot. It was not a healthy time for me, as I felt like I never had a spare moment away from the business. I was at 'no' for question 2 above.

I worked like that because I was still at 'yes' on the other two questions. Hiring staff relieved that time pressure on me and allowed me to enjoy my work even more.

When I hit the trifecta of feeling like I was not making progress towards my goals, when I did not any have time for myself, my family or my friends and when I was not having any fun in the business, I was a wreck.

The Fall of 2000 and the Winter of 2001 was a rough period of time for many in the Internet industry, and digital.forest was not immune to the shrinking Internet bubble. It created challenges and stresses like I had never before experienced. Those pressures, coupled with a deteriorating relationship in my personal life, left me unable to sleep, gave me chest pains, added 30 pounds to my frame, inserted searing migraines into my head and turned more than a few hairs on my head prematurely gray.

I was a classic example of a burned out basket case.

By March of 2001, my life consisted of a haze of non-sleep at night and non-functioning at work. I ignored my friends, my family, my hobbies, what was going on in the world around me. I was perpetually stressed about a lack of money for the business and the crushing weight of debt that would land on my head if the business failed.

So I quit. I stepped down as CEO of the company I had founded and took a four month sabbatical. A great weight was lifted from me by doing so, and I felt better emotionally than I had in years.

I relate this tale as it neatly illustrates what can happen if you lose focus on your goals. Like many others during the same period of history, I allowed myself to be swept into the group hallucination that markets would ever expand and that simply having a pulse in the Internet industry was a guarantee of riches.

Not more than six months prior I had felt on top of the world. I had raised close to a million dollars for the company, business was booming and it seemed like the sky was the limit.

But by taking on the dreams and goals of others, I had forsaken my own and it left me vulnerable to the vicissitudes of the marketplace and the challenges of managing a business during a downturn in the economy.

Proof that the greatest threats to our businesses lay not with our competition, but within ourselves.

So what are your criteria for happiness? For satisfaction? For riches?

If you know them in your daily life, you will also find them in your business. If you seek the answers to these questions within your business, be prepared for a rocky ride.

Remember: how your life will change is up to you, but you must first decide what you want to change.

Next month: We will lighten up on the metaphysics and look at the concrete world of planning. It is good for SCUBA diving, hiking, and business.

Chris Kilbourn is an independent small business, network and web infrastructure consultant. Chris is also the founder of digital.forest, Inc., http://www.forest.net, which offers database, application and web hosting services in addition to server colocation. When he's not out running marathons, you may contact him at chrisk@forest.net.