‘œThe critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.’ ‘“ Nolan Bushnell, founder of Atari and Chuck E. Cheese’s

It was January of 2001, and my wife and I had suddenly found ourselves unemployed for the second time with an 18-month period.   The bad news, of course, was that we were unemployed.   The good news was that we had a potential client wanting us to work on a software development project.

After having a prior business fail, which contributed to me filing for bankruptcy several years before, I wasn’t exactly eager to start another business.   I’d been there, done that, and had lost everything for taking the risk.   My wife was more enthusiastic about the idea, but after considerable discussion we decided to take our client’s offer.   I figured, worst case, we could always look for real jobs after we finished this one project.

We drew up a business plan, put together a proposal, and waited until our first check arrived (and cleared) before we bought anything for our new business or started work on the job.

I was determined not to have another business fail, so we put several rules in place to ensure we didn’t make some of the same mistakes I’d made with my previous business:

  1. At the first sign of unprofitability, we quit.
  2. Cash is King.   We don’t go into debt unless we can demonstrate we have the income to cover it.
  3. We will operate the business out of our home (a 22-foot travel trailer) to keep overhead and expenses low.

Although the rules we set in place for our business won’t work for all business models, especially those that require considerable capital investment, it certainly has worked for us.   By refusing to sign an office space lease and keeping our overhead low, our business has been profitable since day one.   Some years have been better than others, but our low overhead has ensured that our business has consistently turned at least a small profit for eight years.

That doesn’t mean that our business venture has been easy.   We’ve learned a few particularly painful lessons along the way.

Lessons learned:

1.       No matter how much you like or trust your client, insist on a deposit and timely payments.   Over the years, we’ve had a number of formerly nice and trustworthy clients stiff us.   Most didn’t pay because they were in financial trouble, and didn’t want to admit they were having problems.   Rather than cut us a check, they started coming up with elaborate promises to pay. Foolishly, we kept working, believing we’d eventually get our money. We now have a no-exceptions policy of ‘œno checkie, no workie’ at our office.   We’ve learned that if a client doesn’t pay promptly, they probably won’t pay at all.

2.       When previously happy clients suddenly and inexplicably start finding fault with your work for no good reason, be suspicious. Several of our clients who ultimately didn’t pay in full used complaints as an excuse not to pay.

3.       Be wary accepting projects for share of equity or barter. Over the years, we’ve had clients offer us many projects that didn’t offer monetary compensation. Although we had the wisdom to turn most of them down, the few that we did accept turned out to be a better deal for the client than for us. In one case, we agreed to put together a Web site for advertising space in a local technology newspaper.   Our advertisements ran for months, never gathering us anything but a stack of resumes from desperate, and mostly unqualified, programmers looking for work.   Not once did we connect with a potential client through the paper.

4.       Freelancing Web sites are not always a good place to find work. Although we’ve found a number of projects through various freelancing sites, we’ve typically found that clients who seek vendors there aren’t necessarily looking for quality work.   They tend to want to offer projects to the lowest bidder, and use the threat of negative feedback on the site to keep you working outside the scope of the original statement of work.

5.       Keep detailed notes of conversations, and make sure important agreements are done in writing. One of our biggest non-payers, when we sued for non-payment, tried to claim that our work was shoddy and didn’t meet specification.   Fortunately, we’d kept detailed notes, specifications and e-mails, so we were able to prove in court that we’d delivered what we promised and the client was pleased with our work. Although the judge ruled in our favor, the client soon declared bankruptcy and we never were paid.

6.       For some types of businesses, traditional advertising doesn’t work. In our case, we found that networking and word-of-mouth yielded far more clients.   We also found several long-term clients through the help-wanted section of the newspaper.   Often, employers looking for part-time help were willing to hire us on as consultants, saving them the time and hassle of benefits and payroll taxes.

Next in series: Better House

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