Starting a Business

[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 Schneed10

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.

Originally Posted by Schneed10

Forgot to mention, part of my job entails strategic market analysis. I administrate our market and demographic databases. Its of course centered around healthcare and the Philadelphia market because obviously that's where we're located, but if you think you need any demographic data for markets you're considering targeting, I can probably work something out quietly and get it to you.

I'd imagine software is something you'd peddle to other software firms, or peddle electronically via the internet. So demographic information on a particular region or target market may not be relevant to your business model. But if you think you'd have a use for it and want to talk more, feel free to PM.

Thanks for the advise. I will have to get back to you on the demographics stuff and further advise.

[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.

[saden1]

Originally Posted by diehard

Got your business plan together?

I'm working on the business plan right now and I have no business partners yet. Still need to flush things out a bit more.

[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.

[KLHJ2]

How is it going Saden? What type of business have or were you trying to start?

[saden1]

Originally Posted by Angry

How is it going Saden? What type of business have or were you trying to start?

I missed this.

It's going pretty good though I've had a few setbacks. I'm having an issues with what I thought was a partner. He is the business guy and I'm am the software guy but it seems that I am to do everything. In any case, I've dropped him though I suspect if I am successful he'll be suing me. I've also had to deal with a few other things related to the software stack I was using. I changed the back-end which set me back about 6 weeks but it had to be done. I'm back on track now and implementing core features.

There still a lot of stuff that has to be done but right now I'm working on creating storyboard and pitch deck. I am trying to everything the right away and if all goes well we will have a demo and pitch deck to show angle investors in September.

Anywho, I may call upon you warpathers to take a survey and beta-test the product when it is complete.

p.s. Anyone have experience severing ties with a business partners? Any suggestions of how to do it best.

[JoeRedskin]

In writing with clear and unequivocal statements. If there is anything amicable left in the relationship, enter into an agreement that terminates the relationship and in which he rescinds all rights to any interest in the company including any rights in earnings derived from his past contributions.

If he has been paid or put money into the business, make sure that it is accounted for and he agrees that it has been accounted for.

If he has received all the compensation he is going to receive, spell that out and make clear he is owed nothing else. If he is going to receive compensation to waive all interest in the company's future earnings, spell out the compensation and the waiver.

If it is not amicable, do all the same things send it to him asking for him to set forth his disputes, if any, in a set time frame. Send it registered/certified, etc. Serve it on him by private process server if you have to. Once the deadline passes, if he has not responded, send a letter indicating the partnership is over in accordance with the terms of the prior letter.

Mercilessly put things in writing, no detail is too small and be clear that he has waived, either by agreement or by his failure to timely dispute after notice, any future interest in the business and has similarly waived any money owed him for his past contributions.

If he is willing to agree, it is easy. If not, paper, paper and more paper. Remember, you want him out of the past and future of the business. You want to owe him nothing for the past and extinguish any claims he would try to bring in the future.

Did you have a partnership agreement to begin with- either oral or written - concerning investments in and proceeds of the business?

[firstdown]

Send him one of these with a letter to go pound sand.



I would quit using any words like partner because he can use that against you.

[FRPLG]

Originally Posted by JoeRedskin

In writing with clear and unequivocal statements. If there is anything amicable left in the relationship, enter into an agreement that terminates the relationship and in which he rescinds all rights to any interest in the company including any rights in earnings derived from his past contributions.

If he has been paid or put money into the business, make sure that it is accounted for and he agrees that it has been accounted for.

If he has received all the compensation he is going to receive, spell that out and make clear he is owed nothing else. If he is going to receive compensation to waive all interest in the company's future earnings, spell out the compensation and the waiver.

If it is not amicable, do all the same things send it to him asking for him to set forth his disputes, if any, in a set time frame. Send it registered/certified, etc. Serve it on him by private process server if you have to. Once the deadline passes, if he has not responded, send a letter indicating the partnership is over in accordance with the terms of the prior letter.

Mercilessly put things in writing, no detail is too small and be clear that he has waived, either by agreement or by his failure to timely dispute after notice, any future interest in the business and has similarly waived any money owed him for his past contributions.

If he is willing to agree, it is easy. If not, paper, paper and more paper. Remember, you want him out of the past and future of the business. You want to owe him nothing for the past and extinguish any claims he would try to bring in the future.

Did you have a partnership agreement to begin with- either oral or written - concerning investments in and proceeds of the business?

Or more succinctly put....hire a lawyer.

[saden1]

Originally Posted by JoeRedskin

In writing with clear and unequivocal statements. If there is anything amicable left in the relationship, enter into an agreement that terminates the relationship and in which he rescinds all rights to any interest in the company including any rights in earnings derived from his past contributions.

If he has been paid or put money into the business, make sure that it is accounted for and he agrees that it has been accounted for.

If he has received all the compensation he is going to receive, spell that out and make clear he is owed nothing else. If he is going to receive compensation to waive all interest in the company's future earnings, spell out the compensation and the waiver.

If it is not amicable, do all the same things send it to him asking for him to set forth his disputes, if any, in a set time frame. Send it registered/certified, etc. Serve it on him by private process server if you have to. Once the deadline passes, if he has not responded, send a letter indicating the partnership is over in accordance with the terms of the prior letter.

Mercilessly put things in writing, no detail is too small and be clear that he has waived, either by agreement or by his failure to timely dispute after notice, any future interest in the business and has similarly waived any money owed him for his past contributions.

If he is willing to agree, it is easy. If not, paper, paper and more paper. Remember, you want him out of the past and future of the business. You want to owe him nothing for the past and extinguish any claims he would try to bring in the future.

Did you have a partnership agreement to begin with- either oral or written - concerning investments in and proceeds of the business?

He hasn't put a single cent into the business while I have put in nearly 2K thus far not to mention enormous amount of time and energy. No one has been paid for any services rendered and won't be paid for some time. You get paid in equity and he hasn't lived up to his end.

We have had oral conversation about going into partnership and his contribution so far has all been oral in nature (mentoring if you will). We don't have any legal partnership and the couple times I have brought the subject up for discussion he said we aren't there yet and need to spend our money wisely (lean startup model, etc). Now, we are ready to take the next step and it make sense to get all our legal ducks in a row but he has been a no show several times for our meetings and frankly I am tired of his lack of effort and commitment.

I am meeting with a tech startup law firm this Friday to create a formal business partnership with my other partners and represent our company in all future legal matters. I intend to bring up the issues with this particular partner and hopefully they will do all the work in legally serving ties with him.

[KLHJ2]

Originally Posted by saden1

I missed this.

It's going pretty good though I've had a few setbacks. I'm having an issues with what I thought was a partner. He is the business guy and I'm am the software guy but it seems that I am to do everything. In any case, I've dropped him though I suspect if I am successful he'll be suing me. I've also had to deal with a few other things related to the software stack I was using. I changed the back-end which set me back about 6 weeks but it had to be done. I'm back on track now and implementing core features.

There still a lot of stuff that has to be done but right now I'm working on creating storyboard and pitch deck. I am trying to everything the right away and if all goes well we will have a demo and pitch deck to show angle investors in September.

Anywho, I may call upon you warpathers to take a survey and beta-test the product when it is complete.

p.s. Anyone have experience severing ties with a business partners? Any suggestions of how to do it best.

Ironic that you would ask. Whoever is the majority owner has the upper hand. If you are equal partners then you both must come to a formal agreement. The easiest way and what I did was (although I was the majority owner) formally resign from the company and turned over all intrest to my partners. After my resignation we drew up some paperwork and held a formal debriefing. Basically you guys will have to come to terms on some things (the product etc.). If you guys cannot come to terms then I'm sorry to say that there is probably no way to avoid a lawsuit.

As for me in case you were wondering I may start another company later on, but I will not have a partner(s).

[jbcjr14]

If you have nothing in writing about a partnership, I would say you have about 90% of the battle won. The issue is what state you reside and if verbal contracts constitute a legal binding agreement. I am not an attorney, but did sleep at a Holiday Inn last evening. Maybe one of the legal warpathers can comment to this regard.

[KLHJ2]

Originally Posted by saden1

He hasn't put a single cent into the business while I have put in nearly 2K thus far not to mention enormous amount of time and energy. No one has been paid for any services rendered and won't be paid for some time. You get paid in equity and he hasn't lived up to his end.

We have had oral conversation about going into partnership and his contribution so far has all been oral in nature (mentoring if you will). We don't have any legal partnership and the couple times I have brought the subject up for discussion he said we aren't there yet and need to spend our money wisely (lean startup model, etc). Now, we are ready to take the next step and it make sense to get all our legal ducks in a row but he has been a no show several times for our meetings and frankly I am tired of his lack of effort and commitment.

I am meeting with a tech startup law firm this Friday to create a formal business partnership with my other partners and represent our company in all future legal matters. I intend to bring up the issues with this particular partner and hopefully they will do all the work in legally serving ties with him.

After reading all of that, you can kick him to the curb with nothing more than a loud and thunderous "Go Away!" If there is nothing on paper that you have signed stating that he has any stake in your company, then it is all too easy. It sounds as if you guys haven't even gotten your "letters of formation" together yet. Proceed with the other partners carefully.

[JoeRedskin]

Originally Posted by jbcjr14

If you have nothing in writing about a partnership, I would say you have about 90% of the battle won. The issue is what state you reside and if verbal contracts constitute a legal binding agreement. I am not an attorney, but did sleep at a Holiday Inn last evening. Maybe one of the legal warpathers can comment to this regard.

Verbal contracts are binding in every state. The issue with verbal contracts, as opposed to written, is proof of the terms - it is easier to prove the terms of a written contract than an oral contract. It is up to the person asserting a term to prove the term existed.