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Advice from the Experienced / Real Pro's?

Champion

Contributor
Apr 12, 2019
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Germany
Hey guys,

I have 2 questions to the experienced guys in this forum:

1. Im currently in the process of starting my first company. My current cash reserves allow me to earn 0 bucks and ride it out for about 8-9 months. Is this too risky to even start? What would you suggest is an acceptable time-frame to be able to "stay in business for" without earning a single dollar?

2. What would you guys say, are absolutely necessary advisors to be spending money on to have them on your team (since they save you A LOT of money in the longrun)? --> Currently I have a lawyer who is assisting me through the incorporation process (was already worth the money) as well as going to hire a tax advisor/accountant. Any other recommendations?

As a side note: Im in Germany, but still happy to hear what your opinions are with experience from US or elsewhere.

Best,
Champion
 

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Tiago

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Can you find a way to start profiting from day one? Usually if we set a timeframe like you did, 8-9 months where you can "ride it out", that's exactly what will happen. You'll spend 8-9 months burning through your cash reserves, and then maybe you'll start really shifting gears and become much more focused on profit.
 
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Champion

Champion

Contributor
Apr 12, 2019
53
32
48
Germany
Can you find a way to start profiting from day one? Usually if we set a timeframe like you did, 8-9 months where you can "ride it out", that's exactly what will happen. You'll spend 8-9 months burning through your cash reserves, and then maybe you'll start really shifting gears and become much more focused on profit.
Thats a super interesting and helpful perspective to look at it from.

My situation is as follows: I can reduce expenses to a minimum per month (approx. 350-400 Euro) in which case I would be able to survive much longer than 8-9 Months without any profits.

My plan, however, is to spend about 1600 Euro per month (marketing), in order to test products and grow my revenue (and hopefully profits) quicker.

If I understand what you're saying correctly, my job is to focus from day 1 on the perfect balance between Operational Costs (Somewhere between 400 and 1600 Euro) and Profits (?).

Perhaps start with smaller marketing budgets, see how it affects profitability when ramping it up, and make decisions from there.

Thanks so much for your reply man!

Best,
Champion
 
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Champion

Champion

Contributor
Apr 12, 2019
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Germany
You need to find what your risk tolerance is and go according to that. Just don't refrain yourself from starting, otherwise you'll never start.
I believe the risk is acceptable for my tollerance. Besides, there is no turning back now anyways, I handed in my resignation 2 weeks ago. I will be paid for 3 more months, then its over, no more secure income.

Since I took the step of quitting my job, questions have been coming up that I never thought about before, questions where im wondering why I didn't ask these before, lol!

Anyways, its like I said, theres no going back now..... Im giving it all I got :)

Can also check-out my follow along thread incase ur curious to see how the next few months go:


Best,
Champion
 

AgainstAllOdds

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Currently I have a lawyer who is assisting me through the incorporation process (was already worth the money) as well as going to hire a tax advisor/accountant. Any other recommendations?
You're going about this backwards.

Why do you have plans for a tax advisor? You don't even make money.

Step 1: Find a market need that you've validated.
Step 2: Fill that need (deliver value in the form of a product or service).
Step 3: Get paid.
Step 4: Do all the lawyer and incorporation stuff after.

You're focusing on the wrong things and asking the wrong questions.

My current cash reserves allow me to earn 0 bucks and ride it out for about 8-9 months. Is this too risky to even start?
No, it's not too risky to start, but do you even have a plan? Do you know how much money you'll be making end of month one? Do you know how much you can scale?

Here's a plan:

"I've cold called one hundred potential clients. Of those hundred, 2 said they would buy. For every client I sign up, I make $90 per month recurring on a one year contract. I can realistically call 10 people a day and schedule the appropriate meetings. There's 21 business days in a calendar month. Therefore, if I call every single day I can for a month, I should have:

21 * 10 = 210 calls
210 calls * 2% close = 4.2 clients per month
4.2 clients * $90 each = $378 first month and recurring;

therefore my runway looks like:
Month 1: $378
Month 2: $756
Month 3: $1,134
Month 4: ...

But then there's other expenses as I scale. As I scale, I will have to pay..."



This is the thought process.

If this is not the way you're thinking, then yeah, 9 months is too short. You're not ready to start.

If this is the way you're thinking, then you shouldn't be asking us a question that we can't answer. We don't have any information.

You need to either have the information or find the information. You need to validate your idea, and then push forward.

Have you even sold one product or service so far?
 
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Champion

Champion

Contributor
Apr 12, 2019
53
32
48
Germany
You're going about this backwards.

Why do you have plans for a tax advisor? You don't even make money.

Step 1: Find a market need that you've validated.
Step 2: Fill that need (deliver value in the form of a product or service).
Step 3: Get paid.
Step 4: Do all the lawyer and incorporation stuff after.

You're focusing on the wrong things and asking the wrong questions.



No, it's not too risky to start, but do you even have a plan? Do you know how much money you'll be making end of month one? Do you know how much you can scale?

Here's a plan:

"I've cold called one hundred potential clients. Of those hundred, 2 said they would buy. For every client I sign up, I make $90 per month recurring on a one year contract. I can realistically call 10 people a day and schedule the appropriate meetings. There's 21 business days in a calendar month. Therefore, if I call every single day I can for a month, I should have:

21 * 10 = 210 calls
210 calls * 2% close = 4.2 clients per month
4.2 clients * $90 each = $378 first month and recurring;

therefore my runway looks like:
Month 1: $378
Month 2: $756
Month 3: $1,134
Month 4: ...

But then there's other expenses as I scale. As I scale, I will have to pay..."



This is the thought process.

If this is not the way you're thinking, then yeah, 9 months is too short. You're not ready to start.

If this is the way you're thinking, then you shouldn't be asking us a question that we can't answer. We don't have any information.

You need to either have the information or find the information. You need to validate your idea, and then push forward.

Have you even sold one product or service so far?
Firstly, thank you for the descriptive reply.

Regarding your 4 Step process, I dont know how online works in the US, but in Germany there are many legal regulations to follow. I have already been burnt once selling online (received Cease & Desist Orders and been sued by 2 different lawyers) and I vowed to never do it again, unless incorporated.

Therefore my reason of incorporating first, then beginning with the sales. If you ask me, of course I would also much prefer to validate first and then incorporate once the concept is proven. However, to prevent any issues, im incorporating from the start, before ANY BUSINESS even begins.

Regarding your example with cold calls, I obviously dont have any stats/figures like that yet, since im still incorporating and will commence with business once I have the legal requirements down. However, I have my previous experience with selling online and know how many sales I need per day, per month etc... and what I need to do in order to roughly get to those sales. I think MJ calls it the concept of "applying mathematics to the equation" and im very aware of its importance.

Let me get started with operating the business and once I have more detailed information (i.e. # of visitors, conversion rates, etc..) I will post my questions. Perhaps u were right in saying that there simply isnt enough information to give me any helpful advice at this stage.

My main question was just supposed to be in general: what type of advisors would you definitely suggest to have and not be afraid of spending money on (because they actually end up saving you money in the end).

Best,
Champion
 

v1vr

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Wouldn't question one be dependent on the business or industry you are in?

For example, if you're selling widgets on Amazon and you haven't made a single dollar after a month or two, you might want to call it quits.

If you're developing some ground-breaking processing technology for the oil & gas industry, developing your product and actually making money on the market might take a lot longer than a month or two.
 

wepra

New Contributor
Jul 12, 2019
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What type of business ? Selling a product, service or? If you selling a product, you can always do a presale order system to test the market and see the interest of your product or service in the market. You are talking about marketing and so on, however you first need to see if your product / service will be welcome by the market you are in. I suggest you do a presale order system to engage some customers and see how viable your products are to the market. This also limits your expenses and gets income coming in before you even spend a lot of money buying inventory. Good Luck!

A good book to read is The Personal MBA master the art of business by Josh Kaufman, lots of strategies on how to start the business, what to do before you open the doors, test the market to see if product / service could work.
 

Jon L

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Firstly, thank you for the descriptive reply.

Regarding your 4 Step process, I dont know how online works in the US, but in Germany there are many legal regulations to follow. I have already been burnt once selling online (received Cease & Desist Orders and been sued by 2 different lawyers) and I vowed to never do it again, unless incorporated.

Therefore my reason of incorporating first, then beginning with the sales. If you ask me, of course I would also much prefer to validate first and then incorporate once the concept is proven. However, to prevent any issues, im incorporating from the start, before ANY BUSINESS even begins.

Regarding your example with cold calls, I obviously dont have any stats/figures like that yet, since im still incorporating and will commence with business once I have the legal requirements down. However, I have my previous experience with selling online and know how many sales I need per day, per month etc... and what I need to do in order to roughly get to those sales. I think MJ calls it the concept of "applying mathematics to the equation" and im very aware of its importance.

Let me get started with operating the business and once I have more detailed information (i.e. # of visitors, conversion rates, etc..) I will post my questions. Perhaps u were right in saying that there simply isnt enough information to give me any helpful advice at this stage.

My main question was just supposed to be in general: what type of advisors would you definitely suggest to have and not be afraid of spending money on (because they actually end up saving you money in the end).

Best,
Champion
I think the advice here is to do only the things absolutely required right now for the business to succeed. If you don't have any revenue, you won't have any of the problems that an advisor will protect you from. So, until you're making at least a few thousand a month from the business (if not much more), winging it is more than fine.

When it becomes obvious that your business has wings, then go hire some advisors.

If you're going to spend money on advisors right now, find some that will tell you how to avoid spending money: find a lawyer that will tell you how to avoid trouble without incorporating, for example.

All this planning for future problems can make you feel like you're making progress, when what's actually going on is that you're just procrastinating doing the difficult stuff (selling, creating a product, iterating, dealing with customers, networking, setting up distribution networks, etc)
 

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OP
OP
Champion

Champion

Contributor
Apr 12, 2019
53
32
48
Germany
Wouldn't question one be dependent on the business or industry you are in?

For example, if you're selling widgets on Amazon and you haven't made a single dollar after a month or two, you might want to call it quits.

If you're developing some ground-breaking processing technology for the oil & gas industry, developing your product and actually making money on the market might take a lot longer than a month or two.
Ofcourse!

My Product is in the fashion & Accessories Arena (B2C), so basically AOV of around 20-70 Dollars I would say.
 
OP
OP
Champion

Champion

Contributor
Apr 12, 2019
53
32
48
Germany
What type of business ? Selling a product, service or? If you selling a product, you can always do a presale order system to test the market and see the interest of your product or service in the market. You are talking about marketing and so on, however you first need to see if your product / service will be welcome by the market you are in. I suggest you do a presale order system to engage some customers and see how viable your products are to the market. This also limits your expenses and gets income coming in before you even spend a lot of money buying inventory. Good Luck!

A good book to read is The Personal MBA master the art of business by Josh Kaufman, lots of strategies on how to start the business, what to do before you open the doors, test the market to see if product / service could work.
Thanks a lot for the tips man! I will checkout the book.

Best,
Champion
 
OP
OP
Champion

Champion

Contributor
Apr 12, 2019
53
32
48
Germany
I think the advice here is to do only the things absolutely required right now for the business to succeed. If you don't have any revenue, you won't have any of the problems that an advisor will protect you from. So, until you're making at least a few thousand a month from the business (if not much more), winging it is more than fine.

When it becomes obvious that your business has wings, then go hire some advisors.

If you're going to spend money on advisors right now, find some that will tell you how to avoid spending money: find a lawyer that will tell you how to avoid trouble without incorporating, for example.

All this planning for future problems can make you feel like you're making progress, when what's actually going on is that you're just procrastinating doing the difficult stuff (selling, creating a product, iterating, dealing with customers, networking, setting up distribution networks, etc)
I absolutely agree with what you say and so far, I have done exactly that. The lawyer that I hired to help me incorporate did not cost me a lot of money. I hired him only for this one job (to assist me in incorporation) and im sure he already was worth his money.

Il give you an example:

The cost of one appointment at the notary office (where we go to incorporate the company) is 250 Euros. If a single document is missing, the notary makes me pay and another appointment is needed.

My lawyer is assisting me through the entire incorporation process for 170 Euros.

He already found the following error which I would have made, had I not had him:

- My company name that I first intended to use was illegitimate (XYZ Group Inc.). In Germany, it is not allowed to be called "Group" unless it is an umbrella company and u own many smaller companies that fall under it (I didnt know that my first company therefore cant have the name "Group" in it).

This error alone would have meant a second appointment at the notarys office and therefore another 250 Euros for nothing..

So thats what I kind of meant, in general terms, I was asking advice from more experienced people because you guys usually know where there is a high probability to make mistakes (Obviously incorporation could be one of them).

I think I did not phrase my initial post very clearly now, but I hope you understand what I meant.

Thanks everyone for the feedback so far. Stay tuned for the coming weeks, I will post as I take more action and have some data / results to share with you guys!

Best,
Champion
 

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