As a first time small business entrepreneur, the single biggest thing you don’t know is . . . everything that you don’t know.
That wasn’t meant to be a joke, and certainly not as an insult. Rather, it’s a simple statement of fact. You’re embarking on a journey you’ve never taken before, and it’s perfectly reasonable that you have very little experience in almost everything about your new business venture – except for your specific product/service expertise that you’ve brought into the business. If you’re a first time entrepreneur, odds are you’re bringing very little small business operational experience. Even if you’ve worked in a small business environment, that doesn’t mean you have any experience in the behind-the-scenes decisions that go into running and growing a small business.
There are lots and lots of entrepreneur books that are supposed to be how-to – but one thing that 99% of them don’t do is . . . tell you practical business things that are critical to actually running your business. Virtually all of them are self-help books – books that help you get your juices (enthusiasm) going for running your business, or how to manage your time, or the tricks to becoming a successful entrepreneur. See for yourself – when I searched on “entrepreneur how-to books”, the first hit was from Inc.com titled “The 5 Books Every Entrepreneur Should Read” (https://www.inc.com/ron-gibori/the-5-books-every-entrepreneur-should-read.html). Yup, these are probably books that every entrepreneur should read, as they can make you feel jazzed up about all the work you’re having to do, but none of them focus on the nuts and bolts details of actually running a small business. (Full disclosure: I’ve written just such a how-to book – Start Up! An Entrepreneur’s Guide to A Successful Small Business, and promoting it is one of the primary reasons for this blog site.)
No matter how well you’re capitalized, the last thing you can afford is to make a bunch of small business mistakes – mistakes that can damage your business in big or small ways, mistakes that can cost you lots of time and effort to correct. For this reason, connecting with a small business mentor could be one of the best decisions you make.
A small business mentor isn’t usually someone that you bring on as a regularly paid staffer. It could be a consultant that you schedule monthly face-to-face or phone meetings – most likely a paid consultant, and someone who’s small business expertise you value. Most importantly, it should be an arrangement (and a person) with whom you feel comfortable sharing how your business operates, and even some of your most closely-held business practices (but most likely not trade secrets about your products and services – unless, of course, something becomes relevant to how the business operates). An NDA should be in place, as this will give you the confidence to disclose aspects of your business that should stay within the business.
I like to think of this mentor as part of your Board of Outside Advisors, along with other advisors/mentors that you bring in. At an early stage in your small business you probably won’t have a CFO – someone who sits in a C-Suite office as a salaried employee and manages your finances – but you could certainly benefit from a CFO-level person who serves as an outside advisor and who can give you two hours a month to kick ideas around. Another advisor could be technical, someone who has knowledge of the type of business you’re in (but most likely not competing directly with you) who can kick technical ideas around once a month for a couple of hours. None of these advisors would have voting power within your company, and unless you particularly wanted them to have a sliver of business ownership (not recommended), they would just be paid on a retainer basis.
Your small business mentor should be someone who specializes in – and has lots of prior experience with – the day-to-day details of helping you steer your business from the dozens of land mines you’re bound to face, including the following:
- It’s common for the first time entrepreneur to assume that setting up QuickBooks is all it takes to have solid small business bookkeeping – whoa! – big mistake! The small amount you spend on a professional bookkeeper – a part-time bookkeeper at first – will save you thousands in revenue/expense recognition, help establish expense accounting, and keep you out of trouble with all kinds of regulations and recordkeeping when you hire the first employee.
- Hiring the first employee presents lots of potential problems – such as how to advertise for the employee, how to interview, how to make the job offer (including what to say, what not to say, how to maintain your employer at-will rights), how/when to establish company policies, and how to ensure employees maintain a non-hostile workplace environment and adhere to discrimination and harassment rules.
- How to maintain your legal business status, by making sure you file state and federal paperwork as required. If your business is an LLC, this includes creation of an Operating Agreement, and writing Resolutions that document the important decisions made within your LLC.
- Very important – assistance in developing a business growth plan. Oftentimes, a struggling small business person might be too focused on meeting current commitments (production, financial, product development, sales) that putting good, practical effort and thought into business growth doesn’t get done. When you’re wearing 12 hats, there are always 12+ ways you’re being pulled. It’s really important to have some dedicated time allotted for this.
Don’t find yourself on the wrong side of any of these situations – and having a business mentor is a huge step in the right direction.
How should it work? From experience, I wouldn’t make this person an employee. Don’t give out any form of company ownership to the mentor. I’ve experienced both requirements in my own small business. In one instance, a business financial mentor tried to negotiate a whopping retainer fee – plus a stock grant of 40% of my company ownership!!! I told her to take a hike. The other, I made the horrible mistake of hiring as a Senior Vice President, not only with a huge salary but with an employment contract that made it extremely difficult to fire him later when he came within a whisker of destroying my company.
By all means, pay this mentor handsomely for the time, effort, and experience brought to the discussion. But do it with an agreed-upon consulting fee, and importantly, with an understanding (hopefully in writing) that you can part ways at any time, for any reason, and without future obligations on your part. Ideally, you can meet (by phone or in person) as often as once a month – and it would be great if both of you have input in developing an agenda (definitely create an agenda for every meeting). Because the mentor is in an advisory role, there’s no requirement that you implement everything he/she recommends, but it’s important that you take each recommendation into consideration, to see if it could be advantageous to your own company.
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