How do a few friends without a lot of resources start a business?

August 14, 2009 2:09 PM

How do a few friends with a talent and a vague idea, but no plan and no money, start a business? Or is this a recipe to disaster and broken friendships?

A few friends and I have been "joking" about starting our own web design firm. We're all designers and have done some freelance on the side and the conversation always goes something like. "Hey, wouldn't it be great if we could start our own company?" and a discussion of how we would do "better" ensues. In theory, I love this idea, I've wanted to strike out on my own for a long time and these people are talented and I've worked with them before, and we work well together. However we've got a bunch of things stacked against us:
1) No startup capital
2) Can't afford to leave our jobs to pursue full time (see 1)
3) No experience running a business
4) We all have the same talent pool i.e. we're all designers. Sure, we each have our areas of expertise, but we are missing developers, account managers, etc. . . Though at least so far in our own freelancing we've been able to make due.
5) Plan, there ain't no plan

So far, the only thing I've come up with is forming some kind of freelance cooperative where we work with out own clients with the goal of merging into a design firm once we have the client base and resources to become a single unit. But even that seems like a vague approach without a lot of definition that doesn't really benefit anyone any more than what we're doing by just being friends and talking about freelance work.

Is there something I'm missing? Some way of making a go of this? Or should I leave the idle talk as just idle talk.

posted by [insert clever name here] to work & money (11 comments total)

As a matter of fact, Lifehacker just had an article good for you, appropriately titled How to Build a Website For Scratch With No Experience. It may not be exactly what you're looking for, but it's a good place to start.
posted by photomusic86 at 2:17 PM on August 14 [1 favorite has favorites]

You can do this as a side-gig and have fun with it, working with clients who have more flexibility and don't need someone to fix problems the moment they arise (getting a call at your "real job" about your hobby is generally no good). You can probably ratchet your way up from easy jobs that help set up your group in terms of team management and whatnot, moving up to bigger projects.

Or you can go all-in, but then you'll need a lot more organization, or an idea how to keep things in order. If no one has a background or good grasp on finances, bidding, accounting for time spent and what not, the learning process could hurt a lot. I've seen wonderful artistic people lose a lot of money in projects they loved. In the end, the product was great, but they undersold themselves.
posted by filthy light thief at 2:39 PM on August 14

Plan, there ain't no plan

Start in that end. After all, as a great thinker said: "You've got to be very careful if you don't know where you're going, because you might not get there." Or to be precise, anywhere.

If you cannot come up with a plan, and something that everyone can focus on and commit themselves towards, I'd wait.
posted by effbot at 2:40 PM on August 14 [1 favorite has favorites]

I'm not seeing where this idea benefits from being a group rather than one person. From your own admission, you all have the same skill set and you all would be working independently. It seems the first step would be for some of you to start working on your own freelance projects yourselves so you have some idea what you're about to do, and if you can't do so as individuals there's really nothing better about hanging out with your friends and calling it a company.
posted by meowzilla at 2:43 PM on August 14

If you cannot come up with a plan, and something that everyone can focus on and commit themselves towards, I'd wait.

I'd do exactly the opposite. If you all like working together, you've all been able to find relevant freelance work in the past, and you're all interested in building a company then you might as well try to start a business together. Just have everyone hunt for some freelance work and work on it as a group. As you find more customers you'll get a better sense of what those customers want and you can move the business in that direction. As you work together on a project it will become clear what each of you is best at and theoretically as your company grows you can each focus on doing what you're best at. Since you'll all be doing this on the side, there really isn't much risk.
posted by foodgeek at 2:52 PM on August 14

we all have the same talent pool

This is the huge glaring red siren to me, the klaxons are screaming "abort, abort". If you are a design guy then that is covered, why do you need 5? Who is going to balance the accounts, and plan expenditures? Who is going to go out and hustle up sales?

Please do not do it with this team, I speak from bitter experience.
posted by Meatbomb at 3:05 PM on August 14

Lots of resources out there on making a business plan. Figure it out: what would you physically need to be in this business? What services would you actually offer? How would labor be divided? How would profits be divided? What would you do if one of your number wanted to leave the company? And take his created intellectual property with him? And take his clients with him? What would your marketing strategy be? Etc. Etc. Small business accounting is not rocket science. Sales is a different issue, if nobody has the knack for this you are going to sink. Figure out if you need starting capital. And so on. If your group isn't capable of doing this you shouldn't start a business. If your group isn't willing of going to the trouble of trying you shouldn't start a business. If you end up with a business plan that makes some kind of sense you might want to try starting a business.
posted by nanojath at 5:50 PM on August 14

I was taught from a young age by my grandpa (a property developer) never to go into business with your friends unless you're willing to lose them as friends. I found this out firsthand a couple years ago when I worked for a small business that was started by three friends who all ended up bitter and estranged. If you get into a situation where you're losing each other's money, your friendship is going to go out the window fast. Just a heads up.
posted by Dr. Send at 7:41 PM on August 14 [1 favorite has favorites]

1. Read The E-Myth Revisited. You'll have a plan.
2. Read The Four Hour Work Week. You'll have motivation.
3. Act quickly, decisively, and enjoy freedom.

"The quality of your life is in direct proportion to the amount of uncertainty you can comfortably deal with." Tony Robbins
posted by Merlin144 at 7:55 PM on August 14 [2 favorites has favorites]

The Web is a fast changing business environment, and most clients with the budgets to make a Web design firm profitable are also shortly going to need a lot more than design. Beyond sales and biz dev folks, you'll likely need technical gurus like DBAs and scripting/programming people, business analysts, trainers, project managers, and documentation specialists/technical writers. Or, at least, from the git go, a real ability to contract such specialty work, under the supervision of an in house technical guru/"architect" or two.

So, if you can get a consensus to push forward with your idea from a few of your current friends, you could set up a few "study sub-committees" to split up the pre-planning efforts. Have a "Tech Committee" of 2 or 3 of you to find out who the local technical guru/architect candidates might be, where they live, what they eat, and why they might want to throw in with a lot like you. The "Tech Committee" should also identify particular out-sourcing firms, whether local or abroad, to which you could sub-contract technical work, if called upon for comprehensive design and operation services. Have an "Org Committee" to find local tech oriented law and accounting firms to advise you, and recruit some volunteer advisers from SCORE. Have a "Funding Committee" to explore area tax incentives, grants, and other sources of capital or financial assistance for new business; they should also be talking to your local Chamber of Commerce, about such resources, and attending Chamber meetings for new/small business topics. Have a "Client Facing Committee" to find some sales, biz dev, project manager, and trainer type folks, that you could talk to about your ideas, who might be looking for new opportunities. Meet once a week to hear sub-committee reports, and start working on a business plan, or better yet, a "bare bones" start-up plan, and a "fast track" plan, that considers how you would use development capital, if you got some, to secure the start up of the business, and accelerate its growth.

In 2 months, if each of you puts in 100 hours of real work on these topics, you'll know if starting your own shop will be a likely possibility for profit and personal success, or not. Moreover, either way, you'll know why.
posted by paulsc at 9:37 PM on August 14

I have my own medical writing business (and it’s just me…lone freelancer and I've only done this for 7 months). Even though you will potentially have a business in a different industry, and I still don’t know as much as I should about running a business, I’ve learned a bit along the way.

• Have at least a few months of living expenses tucked away before you even start this. I had work that started the instant I quit my job..and work to keep me busy for the first month. The client then did not pay for 3 months…. Also, if you are just starting out, there will be times when you don’t have work – how are you going to survive?

• I am going to second PaulSc, go see people at SCORE. I just went this past week and they have people who are experts in every domain of business. Get advice before you start. Once you start, set aside time to go back. This is the best thing that I have done so far (they have experts in marketing, experts in accounting, experts who had your particular business, etc) (I think Paul suggested this to me in a previous post, actually).

Finally, this is just me…but I would highly suggest you don’t do this as a group of friends. I can’t provide details here, but let me just say that I accepted a freelance job from a friend the last few months.…worst.experience.ever. (by the end of that job I was probably being paid the equivalent of $10 per hour or less…ugh). I also tried to hire a former acquaintance/former coworker and that was also a huge mistake. (Let's just say I had to redo all the work, had to work ridiculous hours to get it into good shape...and made no $$$ because paid this other person to do the job - our standards were just not the same)

I'd suggest that in the beginning, try this independently. Watch how your friends conduct business. Do they complete it on a timeline? How do they interact with their clients? Do they hand over something that is done well or sloppy? You won’t see this side of someone until you are the one responsible for handing over a job to a client.

If everyone can successfully run their own business after a few months/year - then reconsider joining forces. As a group, though, you could lose clients, your business, and your friends.

Also, just an aside - plan? I don't have a plan, but will probably make a 1 page plan and decide where I'm going - but it evolves as I learn more about running a business (and have more opportunities, too - I never had a chance to do half this stuff as a full-time employee before). Also going to nth Merlin - I've read several "how to run a business" and the moronic "how to be a 6 figure freelancer, secrets of a freelance writer, blah blah blah" books. Most of the business books were crap (and books for freelance writers 100 times worse), but for me, the E-myth revisited is brilliant - he gives you the advice you need as a fledgling business (it would also not have made sense to me...until I had a business)
posted by Wolfster at 10:57 PM on August 14 [1 favorite has favorites]