Starting a Business

[JoeRedskin]

That's a pretty open ended question. Are you starting from ground zero? What kind of business?

[saden1]

Originally Posted by JoeRedskin

That's a pretty open ended question. Are you starting from ground zero? What kind of business?

I intended it to be an open ended question so people can share whatever they think is appropriate.

I'm in the process of starting a software company with my time and money and if things go well I'm hoping to bring on some venture capitalists.

[Schneed10]

Originally Posted by saden1

I intended it to be an open ended question so people can share whatever they think is appropriate.

I'm in the process of starting a software company with my time and money and if things go well I'm hoping to bring on some venture capitalists.

Leveraging skills you already have is huge, I know you're a software guy already, so it's wise to stick with a field you know. Sounds like a field that can keep overhead expenses and working capital really low, at least in the startup phase, that's a plus. I imagine all you need is a powerful PC and maybe a server or two?

Try to develop a few software products as far as you can on your own before hiring others or investing further. Venture capitalists will be much more likely to invest if you show them that you've developed a product or two. Hopefully you can even demonstrate that there is a demand for your product first.

You're going to be dealing in intellectual property, so once you've developed a product to the point where it's nearly ready to go to market, consult with an intellectual property attorney about the process for patents, copyrights, and otherwise protecting yourself.

When you get to the point where you need funding in order to take the next step with your business, give careful consideration to the the financing. Venture capitalists will often want an equity investment in your company. They'll give you funds in exchange for a stake in your business. So if they give you say $100,000 in exchange for a 25% stake in your business, that will entitle them to 25% of all future profits. But the plus is that if your company fails you don't owe them a dime - you won't be liable for paying them back.

The other option is straight up debt. Simply secure a loan and pay regular interest. You can often find loans with a 'cash flow window' structured in such a way that you make only interest payments for a given period of time before having to pay down the principal. You can deduct interest payments against your business's taxes, so you'll reduce your tax liability which gives you cash flow relief while you're in the startup phase.

Taking on a loan has the advantage of allowing you to retain 100% ownership in your business, giving you the right to 100% of the profits. The con is that if your business fails, you'll need to pay back the debt. You'll be liable for doing so, which can thrust you into bankruptcy. There's obviously risk there, but the reward is greater as you retain the rights to 100% of cash flows & profits.

But that brings me to my next point, you can minimize your personal risk by incorporating. Once you've got a product to the point of development and you're ready to consider financing options to fuel growth and you're ready to consider intellectual property lawyers, then it may be wise to talk to said lawyer about incorporating. Incorporating allows you to avoid personal liability in the event your business fails. Debtors will not be able to place liens on any of your personal assets, incorporating essentially builds an unbreakable wall between your business assets and your personal assets. If your business fails when incorporated, your debtors can only place liens against your business assets. If your business fails under a 'sole proprietorship' model (where you simply own the business privately, sans incorporation), they can come after your personal assets.

Good luck saden. Hit me up if you want to discuss anything further, I'll be glad to lend whatever help I can.

[firstdown]

Originally Posted by saden1

I intended it to be an open ended question so people can share whatever they think is appropriate.

I'm in the process of starting a software company with my time and money and if things go well I'm hoping to bring on some venture capitalists.

What type of monety does it take to open a software company and whats the biggest cost?

[saden1]

Originally Posted by firstdown

What type of monety does it take to open a software company and whats the biggest cost?

Not a whole lot of money required. The biggest cost is the initial time I have to invest in developing the software.

[firstdown]

Originally Posted by saden1

Not a whole lot of money required. The biggest cost is the initial time I have to invest in developing the software.

I would say that marketing the software is going to be your biggest cost and what makes or breaks your business. Go on line and do a search after search like your a customer looking for your product and that should give you an idea on some ways to market your product. I'll have to say that's where some trial and error is going to happen. I have waisted thousands of dollars on advertising that produced nothing.