The SPI Beginner’s Guide to Business Fundamentals

How a Good Business Is Structured, From the Inside Out

A blueprint is to an architect what a business model is to an entrepreneur. They’re foundational planning documents that force an ambitious and creative mind to distill, describe, prioritize, organize, and harmonize ideas from their nebulous origins into specifics that work together to support the big picture.

You’d be in your right mind to run out of any building that wasn’t built using a meticulous blueprint. Oddly, many entrepreneurs run their businesses into a market without the equivalent thing there to support them and their teams. Such behavior is, quite frankly, not sound judgment because of the significant risks left unchecked by such a cavalier attitude. Granted, a total collapse is not guaranteed to occur if a business model is absent or rushed, but the chance of that outcome happening is significantly higher.

“I get it,” you say. “I’ll organize my entrepreneurial dream into an actual business model, but what in the heck is that?”

First, it’s not what you’re probably dreading—namely, it’s not some horribly complex thing-a-ma-jig that only scholars can understand. Second, it doesn’t have to take you a month to create. Third, it isn’t something that should be worked on just once and then collect dust on a shelf (or get lost in the ether of your cloud drive). And fourth, there isn’t a right way of creating one, though there are some best practices to consider, as we’ll soon see.

So what is a business model?

I like Joan Magretta’s answer in her Harvard Business Review (HBR) article, “Why Business Models Matter.” In the piece, Margretta, a senior associate at the Harvard Business School, writes that business models are “at heart, stories—stories that explain how enterprises work. A good business model answers Peter Drucker’s age-old questions, ‘Who is the customer? And what does the customer value?’ It also answers the fundamental questions every manager must ask: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost?”

Magretta neatly summaries the practice of business modeling—the act of actually creating your business model—as “the managerial equivalent of the scientific method—you start with a hypothesis, which you then test in action and revise when necessary.” To her, it’s as simple as “tying narrative to numbers,” and then testing both parameters: (a) for narrative, does the story make sense?, and (b) for numbers, does the profit & loss statement (P&L) hold up?

Don’t worry about testing. That, naturally, comes later once you have a good model built that’s gone to market and generated data to analyze. For our purposes here in this chapter, we’ll stay focused on the business modeling part, which raises the next logical question likely buzzing in your head: “Now that I know what a business model is, how do I make one?”

Let’s ask Alex Osterwalder.

Osterwalder is an entrepreneur, speaker, author, and—most notably—creator of the Business Model Canvas. While there are many methods and resources out there to help you develop your business model, his canvas is, according to HBR senior editor Andrea Ovans, “arguably the most comprehensive template on which to construct those hypotheses.”

The Business Model Canvas looks like this:

As you can see, Osterwalder’s canvas comprises nine interconnected components, as follows:

1. Value Proposition—(What do you do?) What core value do you deliver to your audience? Which needs are you satisfying?
2. Customer Segment(s)—(Who do you help?) Which groups are you creating value for? Who is your most important audience?
3. Customer Relationships—(How do you interact?) What relationship does the target audience expect you to establish? How can you integrate that into your work in terms of cost and format?
4. Distribution Channels—(How do you reach them?) Through which channel does your audience want to be reached? Which channels work best? How much do they cost? How can they be integrated into your and your audience’s routines?
5. Revenue Streams—(How much will you make?) For what value is your audience willing to pay? What and how do they recently pay? How would they prefer to pay? How much does every revenue stream contribute to the overall revenues?
6. Key Resources—(What do you need?) What key resources does your value proposition require?
7. Key Activities—(How do you do it?) What key activities does your value proposition require? What activities are most important for your distribution channels, customer relationships, revenue streams, etc?
8. Key Partners—(Who will help you?) Who are your key partners/suppliers? What are the most important motivations for the partnerships?
9. Cost Structure—(What will it cost?) What are the most important costs in your work? Which key resources/ activities are the most expensive?

These nine components partition off nicely into three important groups that represent distinct and valuable concepts for your business, as follows:

1. Value Delivery (right three columns)—Your value proposition (the value itself) flows to-and-from through your customer relationships and distribution channels with your customer segments to create a virtuous loop.
2. Value Creation (left two columns)—Value is created and prepared for delivery by integrating your key Resources, key Activities, and key partners together like well-fitting Legos.
3. Value Capture (foundation)—Value is measured by you (as a business) in economic terms, namely the revenue generated by the revenue streams in association with the expenses incurred via your cost structure.

If you choose to model your business using Osterwalder’s canvas—and I highly suggest that you do, at the very least as a first go—then you’ll need to flesh out all nine of those elements.

Best practices suggest to first start with your value proposition (What do you do?), which sits central in the model’s visual layout. Why start here? Because your value proposition—sometimes referred to as your unique selling proposition (USP)—is the soul of your narrative, your story, your reason for being. It guides a ton of your contemplation of and decision making for the other elements.

Second, develop the rest of your value delivery. You don’t need to worry over the order in which you develop the three included components. Some guidance suggests proceeding from customer segments to distribution channels and then to customer relationships. But really, the three of these ping-pong off each other to inform one another. So, if anything, go a couple of rounds on all three until you feel good about your value delivery as a whole.

Next, dive into your value creation. Tackle this section in the same manner as the value proposition—namely, without too rigid a path through the included components. Rather, circulate among them and hone them together to a point where you feel the whole is developed and integrated with your value proposition.

Finally, build out your value capture. Here’s where numbers and math jump into the mix, which is always an area that tickles my nerdy heart. Roughing out your cost structure at a high level is the beginning of your business’s operating budget. Doing the same for your revenue streams starts to give definition to your business plan. Combined, these two components are each distinct halves of the P&L coin.

Osterwalder’s framework has become so popular that it’s been replicated and spread far and wide. A simple Google search for the term “business model canvas” will yield many variants that you can use for your purposes as well as examples (such as the business model canvas for Netflix and Tesla) to use as comparable references. Definitely check out Osterwalder’s own strategyzer.com site for the original creations.

I especially like DIYtoolkit.org’s variant of the business model canvas. The core canvas template is free to download (as it is in most cases elsewhere) and includes useful instructional content along with the canvas. And the purpose of the DIY organization—to provide “practical tools to trigger and support social innovation”—is top notch.

While entrepreneurs should fortify their thinking at the outset of their new venture using a framework such as this one, the startup moment is not the only time when it’s applicable. So, in the event that your new thing has already taken flight but is lacking in a fully developed business model, it’s absolutely not too late to develop one.

Additionally, when a business enters a new major phase of growth within its lifecycle, it’s often advisable to revisit the underlying assumptions of its business model and adapt from there. Assumptions change over time. Marketplace conditions also change. As a consequence, your business model will need to adapt to new demands and opportunities in the future. Be ready for that, and look forward to it.

We are heeding our own advice here at SPI. Pat’s original SPI model was almost entirely rooted in affiliate revenues fueled through content marketing. Those days are long gone. New offerings such as online courses entered the mix gradually over the years. Most new things begin as experiments, which is a healthy way to validate or invalidate the assumptions at the root of the thing. Today, we’re revisiting our core business model assumptions again and making major new commitments to how we want to structure and grow our business into the future so that we fully live out our mission. We’re excited to expand our capabilities as a means of increasing our value creation and value delivery to others.

Now that you have a better understanding of how a strong business model is structured, let’s turn to what it takes to properly form and launch a business. We’ll delve into those important topics in the next chapter.

How to Start a Business Built to Endure

False starts are an everyday occurrence in the land of startups. To avoid tripping yourself out of the gate, pay attention to several critical founding decisions, which we’ll review in this chapter.

Being in possession of a bright, promising, exciting, game-changing new business idea is a euphoric rush of emotions. The emoji sums it up for me. Initially, it’s all party, party, party!

If you’ve experienced that rush before, then you may be familiar with the nosedive those emotions can take when the dream leads to questions about the legal, tax, financing, and related matters you may know little to nothing about that are blocking you from bringing your dream to life. That mental state shift is best represented by the emoji.

Thankfully, setting up and incorporating your business doesn’t need to trigger a nuclear winter inside your head. As long as you learn the ropes and proceed in an organized manner, you can get your new business in gear without too much of a headache.

To set the stage, here are some of the valuable lessons you’ll learn in this chapter as we explore how to intelligently set up and incorporate your new business:

• Why you should never form a new business venture with a co-founder until you and your partner have reached alignment on the fundamentals.
• How to capitalize your new business venture with the cash it needs to get started and operate, and why you need to care about this during the formation process.
• What it takes to develop an operating agreement for your business that empowers its initial formation and successfully governs its ongoing operations.
• What the differences are among the various business entity types so that you can make the most informed decision about which one is best for your new venture.
• Why your state of incorporation matters, and why incorporating in the State of Delaware may be an advantage.
• What the heck an S-corp election is and how to harness it to potentially reap significant tax benefits.
• Where to actually register your business with federal, state, and local agencies so that it is fully recognized as legitimate and functioning.
• What online tools exist to ease your business formation burdens, including a special option from one of the world’s most respected financial technology companies.
• When to consider engaging professional advisors such as attorneys and accountants to help you set up and incorporate your business the right way the first time.

Now, with that stage set, let’s get on with the learning!

1. Reach Alignment With Your Co-Founders, If Any

It’s critical to align expectations with any co-founders you may have for your new venture before officially forming it. Without such alignment, troubles will almost certainly arise related to individual roles and responsibilities, how to make key decisions, how to resolve conflict, how to break ties when alignment cannot be found, and much more.

Specifically, here are some of the big risks that can be avoided when founders talk with humility, honesty, and intention upfront in the business formation process:

1. Uncalibrated equity allocations based on what each person is bringing to the table for the company’s benefit, which is perhaps the most sensitive topic to get right up front before inking any documents to avoid major disagreements, trouble, and legal fees later.
2. Ambiguity about what happens if the founders find themselves at a deadlock on essential matters such as whether or not to raise capital, hire (or fire) a team member, and what direction to take the company, especially once the company’s product or service has reached the market and there is data to consider in reflection of the company’s business model and business practices.
3. Resentment toward one another on alleged grounds that one person is putting in more time and energy than the other, or that one person is held more accountable to producing results than the other (or both), which may not seem fair in connection with each person’s compensation, including their respective equity positions in the company.
4. Difficulty to exit one of the founders from the company, for any reason whatsoever, because a proper “buy/sell” (or equivalent) provision wasn’t thought up and agreed to in advance of forming the company.

It may sound weird, but these talks with potential co-founders are very similar to “define the relationship” (a.k.a., the “DTR”) conversations with your potential life partner. When you’ve reached the stage in your relationship (and discussion of the business idea at hand) where this conversation needs to happen, that’s usually a good thing because it suggests that you both are serious about one another, share a common vision and set of values upon which to form the company, and may be committed to taking this crazy business idea seriously enough to turn into something special.

Of course, the talk may not go the way you hope. That’s okay. Before encumbering yourself (and your co-founder[s]) with the legal bonds that come with the actual formation of the company, evaluate whether or not you both are on the same page. Having a vivid business model on paper—that you worked on in chapter 1—will help with these conversations. Talk about your needs, wants, hopes, and fears as much as the business mechanics. If you don’t fully vet each other now with all cards on the table, there’s always the chance that some unspoken thing will come back to bite you later.

If you have a co-founder in mind, and if you do find strong alignment with him or her, make sure to spend some dedicated time discussing the startup capital needs of this beautiful business idea you both are contemplating. If you do not have a co-founder joining you on this venture, then figuring out the startup capital needs for your business is squarely on your shoulders.

2. Make Decisions Regarding Startup Capital

Capital (a fancy word for cash) is the energy source all businesses need to enter the world, operate, and (hopefully) grow and mature into strong, vibrant companies.

While you don’t need startup capital in your bank account to set up and incorporate your business, it’s advisable to have your funding strategy generally figured out before you actually form your company so that you don’t waste time and resources. And if you do have a co-founder(s) from the beginning, then aligning with them on funding is one of those make or break things you want to fully vet before inking formation documents so as to avoid straining the relationship to potentially disastrous consequences.

Fundamentally, there are three options for funding your startup business:

1. You use your own savings or positive cash flow from other income sources (such as a day job, side hustle, or another business you’re running), which is the definition of bootstrapping your new venture. Once your new venture starts to generate its own revenue, this cash also counts as part of bootstrapping.
2. You use credit, which can take many different forms: a business line of credit from a financial institution like a bank; debt financing from startup accelerators/incubators, state-run programs, or similar; even credit cards (which I’ll say right here and now that I do not advise).
3. You raise capital from family, friends, or others. The others are almost always investors of some ilk: venture capitalists (VCs), angel investors, private equity firms. In recent years, crowdfunding via such platforms as Kickstarter.com and Indiegogo.com has become a popular option to raise capital directly from fans, supporters, and early adopters.

We’ll dig into each of these three options in the next chapter, which is fully devoted to the startup capital needs for your new business. For now, merely recognize that the topic of money—with emphasis on startup money needs—is one of those important foundational pillars to get right from the get-go.

Oh, and take note now that, clearly, there’s no one-size-fits-all plan for funding your new business. Devise a plan that’s right for you (and your co-founders, if you have them) so that when you do set up and formalize your company it’s positioned to make gains out of the gate.

3. Develop an Operating Agreement

Whether you’re starting your business as a solo founder or forming it as part of a founder team, you almost always need an operating agreement. While it’s not a requirement to have one, it’s still wildly advisable to have one to avoid operational issues.

The purpose of an operating agreement, as defined by an article published on the United States Government’s Small Business Administration (SBA) blog, is “to govern the internal operations of the business in a way that suits the specific needs of the business owners. Once the document is signed by the members of the limited liability company, it acts as an official contract binding them to its terms.”

The US SBA blog article lists three reasons why an operating agreement is necessary:

1. To protect the business’ limited liability status
2. To clarify verbal agreements
3. To protect your agreement in the eyes of your state

Developing an operating agreement may sound as pleasurable as walking over hot coals on bare feet. And it will be if you head into this experience with that mindset. Instead, think of an operating agreement as merely the output of how you (and your co-founder[s]) desire to operate the business, codified in proper terms, and it really isn’t that bad.

If you’re a solo founder, then establishing an operating agreement during the setup and incorporation phase of your business is remarkably easy. There’s no negotiation of terms to manage with others. Simple single-member operating agreement templates abound online that you can find via a simple Google search. Or, as we’ll get to later in this chapter, you can engage a legal firm that specializes in business formation, or even just use an online tool like StartPack to get an operating agreement (among other critical founding documents) in place.

A few critical elements of an operating agreement are necessary to call out now as they are required inputs when you register your business with federal, state, and (maybe) local agencies. Those elements are as follows:

• Ownership, management structure, or directors
• Number and value of shares (if you’ve chosen a corporation entity type, which we’ll explore in the next section)

Do not disrespect or take lightly the operating agreement development process, particularly with regard to the above elements. Get these right up front so that the registration process does not become difficult, and especially so that the actual operation of the company isn’t handicapped from the get go.

In light of this seriousness, I’ve heard some entrepreneurs refer to operating agreements as “business prenups.” That’s kinda true because good ones contain thoughtful exit provisions for their members. Far more importantly, a bona fide operating agreement is a bedrock legal instrument that validates the legitimacy of your business, protects it from subjective interpretation—whether by other persons or state agencies—and positions it for operational growth and success.

When you’re working on your operating agreement, a seminal question to ask and answer is: What kind of business should it be? Welcome to the world of different business entity types.

4. Choose a Business Entity Type

Selecting your business entity type is similar to selecting your character in a role-playing game like Dungeons and Dragons or World of Warcraft. Each option has its unique strengths and weaknesses, and it’s important to make an informed decision because it will directly impact very serious matters such as your taxes.

The US SBA describes the importance of your business entity type selection by stating, “The business structure you choose influences everything from day-to-day operations, to taxes, to how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits.”

The most common forms of businesses are the following:

1. Sole proprietorship
2. Limited liability company (LLC)
3. Partnership
4. Corporation (C-corp, S-corp, or B-corp)

The US SBA’s “Choose a business structure” web page is a wonderful resource to read up on the specifics of each entity type. You may also want to reference the IRS business structures web page, which provides additional context as well as associated tax forms for each common entity type.

By default, if you generate income from work you do on your own without a properly formed business entity in place, then you’re operating a sole proprietorship. That may be okay for you, especially if you’re just doing side hustle work as an independent contractor in a low-risk industry. But as you research the other entity types, you’ll quickly learn that a sole proprietorship doesn’t provide nearly the caliber of protections and benefits as, say, an LLC.

If you are looking to incorporate your new business venture with more legal protections than a sole proprietorship can provide, then chances are good that an LLC is the most appropriate choice for you. It usually is for single-member founders who care to establish a business entity separate from themselves and who intend to provide professional services or information products. LLCs are quick, easy, and relatively inexpensive to set up. And LLCs can be bolstered by additional legal and tax provisions, as we’ll see when we crack into the opportunity for an S-corp election for an LLC.

If you’re raising capital from major league investors like venerable Angels or VCs, then a corporation may be the better choice. If this is your circumstance, I advise engaging an experienced attorney or law firm who can help you navigate the complicated waters of structuring and closing an investment round. I’ve been through this experience as a co-founder and board member of an e-commerce software-as-a-service (SaaS) company. It’s a trippy universe that can easily make your head explode. If you care to read up more on this subject, I highly recommend Brad Feld’s book, Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist.

5. Choose a State of Incorporation

Choosing the state to incorporate your business in is thankfully less involved than your business entity type selection. That said, it’s still a seminal decision.

Here are the two most common options:

1. Your home state
2. Delaware

If you’d prefer to not strategize this choice, then simply go with your home state. Done.

However, if you do want to consider some strategy, then investigate the tradeoffs between your home state’s laws (including tax regulations) and those of the State of Delaware. This option is particularly useful for those entrepreneurs forming corporations (C-corps, versus LLCs) involving investors that may demand that the company be incorporated in Delaware for investment-related advantages.

Why is Delaware so popular for business incorporation? There are two main reasons: (a) its business laws are very modern and up-to-date as compared to other states, which in part means that its laws are among the most business-friendly in the country; and (b) it has a high-quality and efficient judiciary process including its special court, the Court of Chancery, that specializes in business law.

Incorporating in Delaware does have its disadvantages. Some include extra incorporation fees, additional fees for a registered agent based in the State of Delaware, and an annual franchise tax, which may be extremely nominal in the grand scheme of things, but still.

If you care to read up more on the advantages and disadvantages of incorporating in the State of Delaware or any state in the US, here are two worthwhile reads:

1. What is the Best State to Form My LLC In (StartPack)
2. The Advantages and Disadvantages of a Delaware LLC (StartPack)

Don’t overthink this choice. Pick a direction and go with it.

6. Decide if the IRS S-Corp Election Is Right for Your Business

Tax rules and regulations vary based on your business entity type. Normally, those rules and regulations are fixed to your base entity type selection. However, there is an option to have your company taxed as an S-corp even if it is, say, an LLC entity.

The article How a Corporation Elects S Corporation Status describes the key benefits of making the S-corp election as follows:

• An S-corp has the same liability protection as a corporation.
• S-corp status can reduce self-employment taxes.
• S-corp status can avoid double taxation.
• S-corp losses can reduce owner taxes.
• S-corp profits are taxed at individual rates.

The same article contains the steps you need to go through in order to properly file for the S-corp election with the IRS. It’s worth noting that the IRS does have qualifications—eight in fact—that you must satisfy in order to be eligible.

Mind you, there are some limitations on S-Corps, including: one class of stock, fewer than 50 shareholders, only US individuals as shareholders, etc. Unless you’re venturing to build a large and complex company with outside investors and potentially international partners, chances are good that your business satisfies those qualifications and, thus, is a candidate for this election.

That said, do what’s right for your circumstance and business.

7. Register Your Business with the Necessary Agencies

In most cases, you will need to register your business with federal, state, and local agencies. However, according to the US SBA, “If you conduct business as yourself using your legal name, you won’t need to register anywhere. But remember, if you don’t register your business, you could miss out on personal liability protection, legal benefits, and tax benefits.”

Based on my experience as an entrepreneur and founder, I would never *not* register my business. Doing it your first time can seem daunting. That’s just because it’s an unknown. Once you gain this experience, it’s a no-brainer decision should you ever have to go through the business formation process again.

Here are a few final considerations—some mandatory, others optional—before you proceed with registering your business:

• S-corp election (if you skipped this topic before, consider it now)
• Trademarks (for your business, brand, product, etc.)
• Articles of incorporation/organization (the key registration document for your state)
• Registered agent (the person or firm you designate to receive official papers and legal documents on behalf of your company)
• Foreign qualifications

Trademarks are purely optional. You do not need to register for them, certainly not as a requirement to form your business and get it up and running. Down the line, registering brand or product trademarks may make good sense for your business.

Articles of incorporation for corporations (or articles of organization for LLCs) are the birth certificates of companies. In either case, the applications for these documents are fairly short and straightforward. In every case, they need to be completed and registered with your chosen state of incorporation.

Registered agents (sometimes called statutory agents) are required to be named for all new businesses. You can act as your own agent, but I prefer having my legal team act on my behalf because they are the subject matter experts on most things that would likely be sent to the registered agent. To say it another way, it’s a big peace of mind for me *not* to serve as my own agent. There are dedicated registered agent services for exactly this purpose. Whomever you choose as your registered agent, they must be located within the same state as your incorporation.

Foreign qualifications sound weird, complex, and scary. They’re not, though their name is misleading. These qualifications have nothing to do with foreign countries. The use of the term “foreign” in this instance applies to states other than your declared state of incorporation, which in this context is considered the “domestic” state. If you have business activities occurring in states beyond your state of incorporation, then you may need to file a “foreign qualification” with those states.

Winning Edits, my creative agency that merged into SPI at the start of 2019, was registered in four additional states beyond its domestic state of Ohio. Why? Because most of my team was remote with respective home bases in Minnesota, Illinois, California, and Massachusetts. During Winning Edits’ integration into SPI, we had to also register SPI in those states for the exact same reason. Given the proliferation of remote workforces, your business may find itself in the same situation either out of the gate or in the future.

Once you have all your ducks in a row, it’s time to file your formation documents with the necessary agencies, which will result in a properly established business in the eyes of the government. It’s an important and exciting step toward becoming a legitimate business!

Here’s the short-list of what you need to do to register:

• Federal: Register for your federal employer identification number (EIN), also known as your federal tax ID. Click here to learn more about an EIN. And click here to cut straight to the IRS web page to submit your EIN application.
• State: Each state is different, so there is no single website to visit for registration. Instead, Google “how to register a business in [state]” to find the appropriate site for you. Look for your chosen state’s Secretary of State website.
• Local: If you intend to run an internet-based business that is relatively simple and small in scope (e.g. a professional services company), then chances are good that you do not need to register anything with your local city or county. That said, still check. Local governments set their own registration requirements.

For a more exhaustive review on what you need to do to actually register your new business with the various agencies, read the US SBA’s excellent register your business online guide, which links out to a number of useful forms and websites that you’ll need to use if you’re intent on the do-it-yourself approach.

However, if the DIY approach gives you a crippling case of night sweats, then consider engaging some professional advisors or using some trustworthy online tools to help you get across the registration finish line.

8. Consider Online Tools to Help, If You Wish

Business formation is one of those activities that entrepreneurs can and should engage with professionals or online services for assistance. Formation can be a complex process. It’s too important to risk getting wrong, and the costs of professional assistance are too nominal (in most cases) to worry about in the grand scheme of things.

There is also the ongoing recurring aspect of keeping your business compliant after it has been formed including but not limited to a registered agent, annual fees to the state and IRS filing requirements.

If you share that opinion, then online tools are a good first option to consider. That’s what I did way back in 2010 when I formed my very first company.

StartPack is my recommended option.

StartPack is a founder-friendly company that provides a one-stop-shop platform to help entrepreneurs like you:

• Form a US company
• A free tax consultation with a certified US Tax Professional
• Open a business bank account remotely from anywhere in the world
• Obtain your Employer Identification Number (EIN) (as a US or non-US resident)
• Accept payments with Stripe or PayPal
• Join the StartPack Community to connect with other founders globally
• Access  over $50,000 in exclusive startup perks and rewards such as credits from Amazon Web Services
• Handle your annual obligations: registered agent, annual reports to the state, taxes, and more

Suffice it to say,  StartPack offers more business setup components than merely legal registration, its principal point of differentiation from options like LegalZoom. Unlike LegalZoom and other one-time offerings out there, StartPack is a long-term solution, sort of like having a business partner by your side (if you don’t have one). Instead of forming your company and feeling like you’ve been “thrown to the wolves”, StartPack is a subscription that is there to scale with you and your business as it grows. And they offer business formation in any state in the US.

Pat and I are big fans of StartPack and are proud to be partnering with them to support entrepreneurs and creators everywhere in launching, maintaining, and growing their US business. (Note: If you do not live in the US but need or desire to form your business in the US, StartPack can help you do that.)

All that said, if your new business venture is complex, then you might want to consider engaging a tax/legal professional to help you navigate the business formation waters.

9. Consider Professional Advisors to Help, If You Wish

At this point in my career, my default choice is to engage my legal counsel, accounting firm, and financial advisory team to inform and shepherd along the formation of any new business, whether solo or as part of a founder team. This choice satisfies a few critical needs:

• Peace of mind that it’s going to get done right
• Expediency that it’s going to get done timely (faster than it would if I did it myself)
• Relief to focus on the high-value work that deserves my attention

If you have an established relationship with (a) an attorney or firm that practices business law, or (b) an accounting firm that may be doing your bookkeeping, then it’s worth asking either or both of them to help you set up and form your new business. At minimum, ask them for a quote on what it’d cost to perform these services.

Many firms offer business formation services as a fixed-fee package or similar service offering. Such offerings should be reasonably priced and ideally not based on billable hours, especially if your business venture isn’t that complex. In low-complexity situations, if the fee isn’t fixed nor reasonable, I’d say no thanks and look elsewhere.

In general, if you seek to work with professional advisors, find those that align with your core values, professional standards, and frameworks of working together. That’s true of SPI’s legal counsel, Stansbury Weaver, who advise and help us with a range of business, legal, and compliance needs. If we ever need to form a new business entity, we’ll go to them in large part because our vision at SPI is complemented and enabled by theirs, which is to “serve first and foremost as strategists. And in our vision great strategists must at all times understand and consider not only legal but also business, economic, cultural, and ethical rules, norms, and customs that impact our client’s entire situation.”

Phew, you’re ready to form your business. Now let’s ignite the operational and growth fires, and that means it’s time to talk capital, the kindling of startup companies—which is precisely what we’ll dig into in the next chapter.

3 Ways to Raise Capital For Your Business

Is your business a hungry monster or a little gremlin? In either case, how are you going to feed it?

Those are the key questions at the heart of the most important aspect of your business: cash.

Cash (formally called “capital” in business terms) is the energy source all businesses need to enter the world, operate, and (hopefully) grow and mature into strong, vibrant companies. Without initial cash, your business may likely never get off the ground. Without generating cash, your business will struggle to operate and grow. And without adequate cash for a long enough period of time, your business risks burning out and shutting down.

When it comes to discussing the cash needs for your business, let’s start at the beginning: the startup moment of your company.

In chapter 2, I emphasized that making decisions regarding startup capital is the second action all founders and entrepreneurs need to concentrate on when setting out to forge a new business from scratch. It’s too fundamental and sensitive a subject to avoid; address it early and head-on, whether you have a co-founder(s) or not.

Not all options for raising capital are appropriate for all founders and entrepreneurs. And pursuing more than one option at a time is often sensible in order to diversify risks and increase the odds that you’ll secure the amount of capital you need to begin operations.

Which capital raising options are most appropriate for your startup company situation? That’s up to you to decide. Let’s explore what’s available to you by diving deep into the three principal avenues to cash.

1. Bootstrapping from Savings and Freelance Cash Flow

Bootstrapping is defined as starting and growing your company using existing resources, such as savings and cash flow from other income sources. While the term can bean overused buzzword in the zeitgeist of modern entrepreneurialism, it’s still a viable funding strategy that is worth serious consideration.

For starters, you may have some personal savings that could be used to fund the early days of your new company. If that’s an option for you, great. However, if tapping into those funds puts severe and undue stress on you and your family, then it’s probably best to consider that cash off limits. If that’s the case, then you need to generate your upstart cash from different sources.

Side hustle cash flow is a great second option. Anything that involves you performing services for customers or clients that result in a new income stream can be earmarked to help launch your new company. You might think that freelancing is a temporary pursuit to raise just enough cash to get your new company off the ground. In many cases, that is likely true. For example, if your dream is to build the next boutique fashion brand for young professionals living in metro markets, and if your core competency is in design, then freelancing as a designer for other fashion brands could make great sense to raise cash for your own retail brand. In that scenario, freelancing isn’t directly linked to the business model you’re envisioning for your company, although the connections you may make with other fashion brands may help a lot with the launch and growth of your own.

That said, freelancing can be synonymous with starting your company even if yours isn’t envisioned to operate on a freelance model, at least not long term. In other words, it can be one and the same thing, which is a third option for starting your company through bootstrapping means. The origin story of RightMessage is a strong example of this option—and it’s magic—in action.

RightMessage is an up-and-coming SaaS platform that helps brands (including SPI) personalize web experiences for their site visitors and customers. You might think that as a SaaS company, RightMessage got its startup funding through venture capital. Not entirely. While it did raise $500,000 from angel investors on a S.A.F.E. (the now famous financing model developed by the legendary startup incubator, Y Combinator), the larger and more important path it pursued was to validate (and fund) the SaaS idea through personalization consulting (e.g. freelancing), followed by selling personalization resources (e.g. online courses).

As Brennan Dunn, CEO of RightMessage, states in his origin story article, “Before creating RightMessage, a tremendous amount of experience and validation (in the form of $$$) occurred by selling personalization consulting (Done-For-You) and then, later, by selling personalization instruction (Do-It-Yourself).” Ultimately, once Dunn had a lot of consulting experience under his belt, he writes that he was able to sell his course more effectively and leverage the knowledge from selling consulting on his sales page. From those two forerunner experiences, Dunn and his team amassed “a tremendous amount of wind at [their] back” when the time came to consider whether to productize their knowhow into a SaaS platform.

The broad takeaways from this gamut of bootstrapping methods represent incredibly powerful questions to consider for your new venture:

• Can you leverage any existing cash reserves to get your business going?
• Can you augment that cash on hand with new income generated by freelancing, however temporary and unrelated to your new company’s intended market?
• Is it possible to begin in a less cash-heavy manner whereby you can validate the concept while generating direct revenues to further bootstrap its development?

Ponder these opportunities deeply before venturing into credit-based fundraising waters because those waters are almost always deeper and more turbulent.

2. Securing Credit or Loans From Financial Institutions

Most founders and entrepreneurs I know utilize various forms of credit to start and grow their companies. Few lean on credit alone due to the inherent risks involved with using credit, a course of action I agree with. So, as we delve into the credit-based opportunities that exist for founders and entrepreneurs like you, I advise caution: secure and use credit with great care.

Credit cards are likely the most obvious form of credit. Most folks have credit cards in their personal lives and know-how they generally operate.

NerdWallet is a phenomenal resource to investigate on all matters related to credit cards. The site is more geared toward personal credit card use cases as compared to small business ones. Still, since a lot of the terms and usage behaviors pertaining to small business credit cards are similar—if not identical—to personal credit cards, it’s a quality resource for founders and entrepreneurs. As a starting point for researching a possible small business credit card that may be best for your circumstances, read their How to Pick the Best Credit Card for You: 4 Easy Steps article as well as research specific card options using their business credit cards ratings and rankings tool.

It’s highly unlikely you will be able to secure a business credit card unless you have already properly incorporated your business. Why? Because financial institutions usually require that a business credit card (and checking account, for that matter) be linked to the company’s federal employer identification number (EIN). It is also likely that they will ask for the company’s Articles of Incorporation, operating agreement, or other seminal founding documents to prove the duly formed existence of the company.

That said, don’t think that you as the founder are off the hook personally for any debts that your company may incur with respect to your usage of a business credit card(s). For first-time founders and small business owners, financial institutions will almost certainly insist as part of their underwriting process that the individual opening the account personally guarantee it, meaning that if your business folds the financial lender can recoup its debts from the individual. That’s a serious decision for many entrepreneurs, especially those that may be pursuing high credit card limits because of the cash demands for their startup company.

A business line of credit is another common form of raising working capital either for immediate upstart needs or growth and development investments. All banks will offer different terms, so it’s important to sit down with a business banker at your local branch and talk through options and details should you have an interest in adding a line of credit to your startup fundraising strategy.

With a business line of credit, you don’t actually receive that cash like you would a loan. In other words, you do not receive that cash directly into your business checking account. Instead, the business line of credit sits outside your business checking account as a separate account. You can then draw cash from this line of credit account into your checking account when you need it. Applicable interest rates are only applied to the amount of cash you draw out and have not repaid to the line within a reporting period. During one of my former companies, we used a business line of credit regularly, and especially during growth periods, in part to build a good credit history in the name of the company, which helps with securing greater amounts of business credit in the future.

Specifically, we pulled on the line of credit to offset certain operating expenses (e.g. payroll, credit card balances), then repaid that draw to the line of credit as soon as possible to showcase that we were responsible with our use of working capital.

One final option here is a small business loan, which is similar to a business line of credit but functions differently. A seminal difference is that with a loan, you do receive the entirety of those funds directly into your checking account. Small Business Administration (SBA) loans are perhaps the most common and popular type of business loan for founders and entrepreneurs, which you can learn more about directly from the United States SBA program webpage.

If you’re struggling with the question “Should I get a loan or a line of credit?” you can use an online calculator like this one from Huntington Bank to evaluate the two options in terms of the cash amount you need, applicable interest rate, any other fees (like an annual fee), and other assumptions like tax rates that are applicable to your circumstances.

If you need a quick guide to further inform your thinking between these two, CreditKarma.com states that a line of credit may be best when (a) “you need ongoing access to cash, and (b) “you need payment flexibility,” versus a loan, which may be best when (a) “you know how much you need to borrow,” and (b) “you want set repayment costs.”

Credit and loan options may sound pretty dull. Don’t discount them, especially if you’re like one of my entrepreneurial friends who is the CEO of a founder team building their own microbrewery here in Columbus, Ohio. A microbrewery business has very different capital needs than, say, an internet-based retail brand, which itself will have very different capital needs from a professional services company like a digital agency.

Regardless of your business, the bottom-line calculus is the same: First, evaluate your company’s specific capital needs in correlation with your company’s business model. Then align specific capital raising strategies to hopefully achieve those funding goals.

To achieve those goals, you may need to venture into the third category of fundraising options: raising capital from investors.

3. Raising Capital from Others, Including Big League Investors

If you aren’t going to bootstrap your new startup company yourself, and if securing credit lines and debt financing don’t sound like a good fit for you—or won’t get you all the way to fulfilling your upstart capital needs—then the third arena to explore for financing your company is direct investments from others.

“Others” can take on a variety of forms. Here are the most notable:

• Friends and family
• Fans and supporters
• Private equity firms
• Angel investors
• Venture capitalists

Friends and Family

This group is precisely that—your family members or friends whom you have personal relationships with and who may be in a position to write checks to you as part of a “friends and family round” of fundraising. Now, although you may be tempted to think that fundraising from such personal contacts is an informal act, it’s not. Any investment dollars you raise for your company should be treated seriously and managed in writing.

Specifically, investment dollars from family and friends don’t always take the same form. As explained in this article from Entrepreneur.com, money raised from such contacts “could be a gift, a loan or an equity investment in the business. Each have pluses and minuses, and each should be recorded in writing, in many cases a legal document.” Different friends and family members will likely have different financial interests in mind, so consider these various forms and align the right one with the individual person. It’s okay to have some take the form of gifts while others take the form of equity investments, so long as those conditions are mutually understood and accepted by the respective parties involved.

If you need guidance figuring out how to approach the conversation (a.k.a. the pitch) with your family and friends, Forbes has a good article to get you started with the basics. Don’t ignore your prep work before you even start that conversation. As the Forbes article mentions, honestly answer questions for yourself such as, “Am I going to give every inch of my soul to making this the biggest and best business this can be?” and, “Am I ready to speak about my business all the time?” You want to think carefully on those points before pitching those close to you because often the personal relationship is put on the line if expectations aren’t abundantly clear up front.

Fans and Supporters

This category of people is very viable for those founders and entrepreneurs who have already developed an engaged following online. Crowdfunding is the hallmark method of activating that audience to participate in a round of fundraising for your new thing—which is often a flagship product for the new company. Pat and Caleb’s Kickstarter campaign for their SwitchPod product is a strong example of involving their fans and supporters in an early-stage capital raise to advance that particular business.

Kickstarter is arguably the largest and most popular crowdfunding platform used by founders and creators, but it’s far from the only one. Other credible options include Indiegogo.com, Gofundme.com, and Patreon.com. Each one has their own unique spin on how to raise funds from fans and supporters. In Patreon’s case, their model is rooted in ongoing contributions (a la, a subscription) from those willing to back a particular creator’s project. Our very own Non Wels, our solutions expert, has a Patreon funding page set up for his personal podcast, You, Me, Empathy.

Private Equity Firms

This category is a whole different—and more serious—can of worms.

Private equity (PE) firms raise their financial capital from their limited partners and invest almost exclusively in privately held, mature, and (usually) traditional companies in exchange for equity.

As you might already be able to tell, PE isn’t usually an appropriate option for younger companies chiefly due to misaligned financial incentives between such small, early-stage companies and the investors. That said, if you have a track record of success as a startup founder and are working on your next big business idea, then that pedigree may be enough to attract some PE interest, especially if your next company promises to be the sort of high-stakes, high-reward venture that PE investors covet.

To expand your knowledge on private equity, read Entrepreneur.com’s A Beginner’s Guide to Private Equity. Even if you do not intend to pursue a PE investment now for whatever reason, I encourage you to read up on the mechanics of PE financing because it’s a good idea to educate yourself as a promising startup founder and serious businessperson.

Angel Investors

If you’ve ever heard of an “angel” investing in a company, that’s an angel investor—an individual (usually with a high net worth) who makes a personal capital contribution into a company in exchange for an equity position. Angels can be one-and-the-same as a family member or friend.

Typically, angels invest in early-stage, high-risk companies such as tech startups. And in most cases, angels operate in stark contrast to venture capitalists because although angels care about the possible return on their investments like venture capitalists, they invest more in the individual entrepreneur (or founder team) and less in the potential viability of the business model.

If you’re considering approaching angels for investment into your company, read Investopedia’s angel investor definition as well as Forbes’ article about the twenty things all entrepreneurs should know about angel investors. And if you care to explore the mindset of a world-class angel, read up on Chris Sacca, who has made billions (yes, billions) from his investments as a super angel from investing early into companies such as Twitter, Uber, Instagram, and Kickstarter. Sacca was featured prominently in season one of Startup, Gimlet Media’s first podcast with founder Alex Blumberg that chronicled the start of their company, which—naturally—Sacca invested in.

Venture Capital

Venture capital (VC) is private equity. That said, VC firms are historically far more willing to take bets on young entrepreneurs and their unproven companies, especially in high-stakes, high-rewards market sectors like technology. And VC money has flowed rather freely over the years, particularly in hot beds like Silicon Valley. That’s why successful tech entrepreneurs like our friends at ConvertKit, Teachable, and RightMessage are often presumed to have taken on VC money even if they actually haven’t. (For the record, Teachable is venture-backed while ConvertKit and RightMessage, as of this writing, are not.)

Venture capital—it’s a lot to get your head around. To begin to make sense of this universe, I highly recommended Brad Feld’s book, Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist.

The Road Forward

Road, well, given all of the variables and options we’ve covered, it’s more like roads. You don’t need to travel the super-fast highway of complicated term sheets from aggressive VCs or excessive loan amounts from financial institutions if your business concept is a little gremlin. And never, ever, accept money from anyone unless you know how to put it to good use in your business to achieve your intended business objectives.

If you do choose the route of big-league money, those professionals and firms will almost certainly require that you develop a use of funds model for the amount of money you’re seeking to raise. So, get ready for that work. In fact, it’s a good exercise to do even if you’re staying small and only looking to raise a little bit of startup capital from family and friends. Everyone will be happier and stand a far greater chance of experiencing a positive return on their respective investments when you’re smart about your use of money.

You’ve now made it through the thicket of capital fundraising. With your newfound wisdom, let’s shift to talking about business operations. The best way to illustrate and teach these important concepts is through a transparent lens on our very own company. So, if you’re up for a look inside the machine that is the SPI business, let’s move on to the next chapter.

Business Case Study: The Operating Dynamics of SPI

Tony Robbins. A primetime news broadcaster. The front-man for a popular band. What do they all have in common? One heck of a team behind the scenes that brings their respective magic to life.

Your favorite newscaster, for example, may be a star. But the folks in the control room are the ones running the show. Aaron Sorkin’s show Newsroom puts the chemistry between newsroom team and big personality broadcaster on captivating and insightful display as only Sorkin can. I love it so much not just because the writing is brilliant but more because of the truths it conveys:

• big personalities cannot do it alone;
• uncontrolled ego is a destructive force;
• mutual deference between authority figures (e.g. between the broadcaster and the EP [executive producer]) is central to trust, alignment, and performance; and
• cohesion of team (with the star included) bonded by a noble purpose bigger than any one person and empowered through principles, process, and standards is the engine that produces and delivers value to others.

This behind the scenes work is exciting and messy at the same time. When it’s done well, the outward projection appears effortless to readers, fans, audiences, and anyone else who may be observing what we do. However, anything that appears effortless is never actually so. Making magic happen is messier than most people think. And it takes an unimaginable amount of practice, individually and collectively, to get good at it.

I admit that I’m a romantic when it comes to this stuff. I live in the control room directing others to conform chaos into order to achieve our intentions much like Mackenzie McKale of Newsroom’s fictional News Night so that the show can go off without a hitch. It’s always a challenge. And it’s always worth it because that’s where the magic comes from.

Care to take a peek inside our control room? You won’t find anyone wearing a headset. And we don’t work behind TV cameras. What we do have are a collection of things that give our work its form and function. We may not be movie stars but I like to think that this stuff equips us with our own form of magic.

As you explore our inner workings in this chapter, think hard about your own. Take notes. Write down questions. Scribble out rough workflow diagrams. Do whatever you need to do to begin forming workable models for your own business operations. Use us as a mirror. That’s not to say that you can or should mimic everything we do. We are far from perfect and not an exemplar of all things for all business types. Rather, by studying us and comparing what you see to yourself and your vision for your own business, you’ll begin to see in high-definition what you want to replicate, what you feel won’t work for you, and which parts are missing for your model that need to be filled in.

Okay, let’s get started. First up, our operational Northstar: purpose.

[Note: Some of the resources below may be affiliate links, meaning SPI receives a commission (at no extra cost to you) if you use that link to make a purchase.]

Purpose

A company’s purpose gives definition to its intention. Purpose should manifest in a few different forms including a stated mission, vision, and core values for the team to rally behind. If these central artifacts don’t exist, then there is no good rally point.

This rally point is seminal to keeping team members in sync with each other so that everyone is rowing in the same direction. If they aren’t, then the team can spin and get nowhere fast even if the individual outputs from each person or department are adequate.

In this way, a common purpose unifies a team much like sheet music unifies a symphony of musicians. In both cases, the output quality of an individual (your copywriter, a clarinet player) or department (your marketing team, the winds section) matters less than how that output integrates with the output of others to achieve the endgame (hitting your goals, delivering a masterful symphonic performance). If the output is disjointed because there was no governing purpose, then you risk making not music but noise and wasting a lot of time, energy, and resources doing so.

We spent most of day one during our Q1 business meeting in January 2019 immersed in this subject matter. It was critical to give this stuff immediate attention after merging so that we didn’t leave the dock without a rudder. It was a powerful and inspiring experience as we worked through ideas and feedback together. What emerged couldn’t have been achieved alone. It was a team effort, which is the point.

We later reconvened as a team for our 2020 strategic planning summit. Once again, we allocated the majority of our day one agenda to this same subject matter. Why? Two important reasons: (1) During our first year of work together as an integrated in-house team, we learned a lot about ourselves, our fans, and our business that deserved to be reflected on and woven into our purpose. And (2) based on those learnings, we needed to fine-tune our mission and vision statements to supercharge our acute 2020 business plan as well as our emergent three-year multi-generational plan (MGP).

Here is what our purpose looks like now after this deep reflection:

Mission: To elevate entrepreneurs to within reach of their dreams.

Vision: SPI is a trusted learning and development ecosystem that serves a worldwide community of online entrepreneurs. The community is alive with individuals and teams from all walks of life and at all stages of their entrepreneurial journeys bonded by a common cause—to build purpose-driven and profitable businesses they can be proud of. SPI empowers its community members to take action toward achieving their goals by providing best-in-class educational content and training experiences. Beyond its own creations, SPI partners up with other industry experts to develop and champion useful resources that further enable its own mission.

Core Values:

• Work With Purpose—The best, most valuable work we can do comes from focusing on priorities, reducing waste of resources, providing helpful feedback, and collaborating with positive intentions.
• Take Care—We strive to care for our team and our community through being considerate of the needs, goals, and boundaries of all, weaving empathy and service into every action and intention.
• Embrace the Process—Be curious. Question assumptions and explore opportunities. Learn from failure and admit mistakes. Reduce chaos. Promote sustainability. And find as much joy in the work as in the success.
• Own Your Outcome—Embrace the privilege that responsibilities provide to do deep work that delivers meaningful results and makes a positive difference in the lives of others.
• Share Without Ego—We offer the complete picture of our experiences—to ourselves and to our audience—to enable authentic learning that promote our values without compromise.
• Choose Health—We embrace, without guilt, the flexibility of our work life that allows us to take care of ourselves first so that we can better serve others.

Mission is a declaration that ideally will waver very little (if at all) over time. It is elemental to your existence. By contrast, vision is an expression of the mission in more concrete terms that *can* be realized over time. Vision statements are usually crafted to represent a two- to three-year pursuit. Finally, core values exist to ensure that those enrolled to help realize the vision do so within a framework of behaviors and cultural norms that promote the caliber of action and accountabilities necessary for success.

Putting this stuff on paper isn’t enough. That’s why for us at SPI, we talk about these things at our quarterly business meetings as well as during routine 1:1 check-in meetings. It’s why we reference these things when we’re debating a big and bold new idea to potentially invest our resources in, such as a new online course or future event offering. In all, these things provide a leveling benchmark for us to use to frame our thoughts, orient our feedback, and govern our actions as a team.

Ensuring safe air exists within our culture is a vital enabler of our purpose. For instance, trading opposing ideas for how to organize and execute our next online course launch can be touchy but is necessary to arrive at the best plan. Additionally, delivering feedback to someone, including to Pat and me, when an important internal deadline is missed that adversely impacts a project is a sensitive moment, yes, but one that cannot be brushed under the rug so that we don’t allow that to become our norm.

The quality of our talks, as well as the efficacy of their outcomes, are inextricably linked to how candidly our purpose is channeled during those conversations. Charles Duhigg (the author of The Power of Habit) beautifully illustrates this theme in his New York Times article about Google’s quest to build the “perfect team.” In it, Duhigg reports on Google’s big discovery: that “psychological safety, more than anything else, was critical to making a team work.”

Nailing your company’s purpose is harder than it looks. And I believe that degree of difficulty increases exponentially as more people enter the picture. So hunker down with your co-founder, partner, or team. Workshop this stuff with safe air. I bet you’ll be pleasantly surprised with what you come up with if you give this the attention it deserves.

People and Partnerships

People are the conduit of your purpose. Recruiting, hiring, on-boarding, training, supporting, and empowering the right people in the right roles is vital to any operation.

We have eight talented professionals on our in-house team, including Pat and me. We serve in roles spanning different functions: marketing, partnerships, education, operations, finance, solutions, product, and technology. Marketing and partnerships roll up into our Growth Team, whereas Education is a standalone team. Pat leads both of those. Solutions, product, and technology all roll up into our Innovation Team. I lead that team in addition to operations and finance. And Pat and I together share executive responsibilities.

If the prospect of hiring staff gives you goosebumps, don’t worry. You don’t need to hire anyone if that feels out of place for your business. Often, startup companies and lifestyle businesses can be effectively operated by you and your co-founders, at least in the beginning. Some can continue on in that manner perhaps indefinitely. However, at some point, you’ll need help. Be okay asking for it when that moment arrives.

We ask for help from others all the time because our in-house team cannot possibly do everything alone. For starters, we still collaborate with freelancers who have unique skills that we do not have in house. We also involve consultants from time to time to pressure-test our own thinking, train us on a new skill or competency area, or lend an alternative point of view even if we think we’re on the right track with a big decision or project. Such individuals include our designers, business coach, book launch consultant, and community manager among others. We cherish these folks as extended team members.

We’re also extremely grateful to work with individuals that we regard as creative partners in our work. Caleb Wojcik of Caleb Wojcik Films exemplifies this caliber of partner. He is our videographer for all video work that Pat doesn’t do himself. He’s a trusted advisor as we vet business plans. And he’s even Pat’s business partner in SwitchPod—which is wicked cool.

Our strategic partners are in a class by themselves. We’re so fortunate to have deep and meaningful relationships with the likes of ConvertKit, Teachable, RightMessage, and other platform partners. Equally so, we’re excited to have deep relationships with our web design and development service partner, Authentik, as well as Pat’s literary agency for book deals, organizers of marquee events like Podcast Movement and Social Media Marketing World, and influencers like Michael Hyatt whom we admire, support, and do occasional joint promotions with. Our ability to live out our purpose is significantly enabled thanks to these folks. 

Policy and Performance

Yikes, policy and performance. That sounds dry. I understand that sentiment. I also assure you that providing clear guidance to the team on what does and does not constitute good performance aligned with and enabling of our purpose is a linchpin in our operations, as it very well should be in the operations of any company with a magnanimous purpose.

First off, we embrace remote work and champion its ethos as a pillar of the future of work. That is our policy and preference. All of us work remotely, even if we reside in a city with a fellow team member. For instance, Sara Jane, our partnerships manager, and I both call Columbus, Ohio home. Similarly, both Pat and Jess, Pat’s assistant, reside in San Diego. We make efforts to work from coworking facilities regularly because, still, there is no substitute for in-person collaboration. (We do have an HQ1 office in San Diego as well as an HQ2 office in Columbus for such occasions.) And we gather as a full team at least twice per year. But most of our team operations function wherever there is a good internet connection. (Let’s be real, we don’t always have quality wifi.)

Next, we have a formal employee handbook of policies and procedures that is a key part of our human resources management. Why are we so serious about this stuff? Because having a child is a serious moment in one’s life. Because getting called to jury duty is a serious event. Because harassment in any form is a serious offense. Because confidentiality is a serious aspect of business. Because travel is a serious business expense. Because time off, in its various forms, is a serious benefit extended to the team that they rightly expect to be honored.

Our employee handbook gets ahead on all of the above situations and many more by stating how we will handle such situations if and when they arise. Already this year, we’ve had a team member called to jury duty; folks using paid time off to travel the world including Hong Kong, Japan, Germany, and Greece; and someone who welcomed the arrival of their firstborn child (um, that’d be me) as well as someone else about to welcome theirs.

I’m a staunch advocate for formalizing such policies not just because it’s good business but more so because it’s being a good human. Certainly, at some point in a business’s growth, these things become legal requirements. Even then, I encourage you not to think about them as dry things you have to do. Rather, I hope you can lean into these expressions of your culture because you care about them. Here’s an excerpt from our Parental Leave policy to give you a flavor of how we embrace these opportunities to care for our team:

“[SPI] believes unequivocally that what is good for its employees and their families is also good for business. Therefore, [SPI] proudly offers a progressive gender-neutral parental leave policy of up to six (6) weeks paid leave (“Parental Leave”) to all of its eligible employees. After six (6) weeks, a full-time employee has the option to come back in a part-time capacity, elect to take unpaid time off, or a combination of the two for up to a total of twelve (12) weeks. . . . The purpose of this policy is to afford parents the quality time and flexibility they need to bond with their new child, adjust to new family situations and schedules, and otherwise do what is necessary on the home front so that when the time comes to return to work the employee is rested, energized, focused, and prepared.”

The above has been inspired by and adopted from a host of companies that champion the same values through their parental leave policies, including such vanguards as Etsy.

Also, we require formal agreements with all of our team members whether they be in-house or not. Declaring the boundaries of any relationship is important for all involved. I know way too many companies that shirk their responsibilities on this front. We don’t.

Finally, we are big champions for the growth and development of our team. That devotion manifests as a combination of performance reviews and professional development plans. Performance feedback is given and discussed regularly in 1:1 check-in meetings. And it’s formalized in annual performance reviews. (Which we are likely to evolve into quarterly reviews.) While discussing performance can be awkward, it’s an essential leadership skill that must be developed and utilized with the right intentions—to support and enable the growth of the team member consistent with the business’s purpose.

Process and Management

Let’s be real: Process can be both a lifesaver and a straight jacket. Process for process-sake is indeed a joke. But disdain for process and the outright rejection of it are willful derelictions of duty for any entrepreneur and business leader motivated to achieve big things.

When deployed well, process is protective armor from the following threats:

• Distractions and interruptions that pull attention away from your priorities
• Wasteful ideation that stymies progress or undoes nearly completed work
• Quality and non-compliance issues in your experiences, services, or products
• Burnout of team members and partners due to disorganized collaboration
• Acrimony and infighting within your culture because expectations aren’t standardized
• Uncontrolled spending that isn’t conscious about its impacts on the bottom line

Furthermore, good process is rocket fuel that ignites the following capabilities:

• Delegation of work to others who are empowered to execute
• Healthy checks and balances between visionary and operational forces
• Effective dissemination of information to the team and other stakeholders
• Timely responsiveness to and recovery from unexpected adversities
• Sustainable resource management including assignments to team members

That said, too much process can immobilize your team by stifling creative thinking, requiring unnecessary busy work, causing disengagement from your business purpose and from each other, among other systemic issues.

The secret sauce of process lies in assembling together acute processes that each target a specific workflow pattern or need. Alone, any one process is small and manageable. Together, they work like linked armor that enables lightweight and nimble performance (versus plate metal armor that constricts performance because it’s big, heavy, and rigid).

Here are some of our most important processes within SPI:

• Strategic business planning
• Month-end and quarter-end financial close
• Editorial management and publishing
• Online course production and launch
• Cross-functional governance

Each of these processes is a targeted workflow within a specific business function owned by the individual leading in that function. For example, Janna (our executive editor), defined, implemented, and leads our editorial management and publishing process. Over years of refinement, it’s become a gold standard for us that enables all of us involved in content creation to operate efficiently. The end result is that we’re months ahead on quality content for the blog and both podcasts, SPI and AskPat, at any given moment.

Cross-functional governance deserves special mention because it’s the one process to rule them all. Lord of the Rings quips aside, our governance process doesn’t rule in a harsh manner. We don’t require arduous paperwork to be completed for every project we do. We keep team meetings to a minimum. And we don’t micro-manage.

Instead, our governance process provides a stable and sustainable foundation upon which managers in the team are empowered with autonomy and authority to plan, organize, and execute their work in direct collaboration with others on the team.

Our model comprises the following components:

• A weekly one-on-one between individuals and their immediate supervisor to review performance expectations, exchange feedback, touch base on work assignments, and generally lend support.
• A two-week sprint schedule that serves as a common measuring stick to organize and integrate work across projects and departments.
• A weekly all-hands staff meeting on Mondays executed like a standup where everyone gets the mic to share their plan for the week ahead and any blockers they’re facing.
• A weekly retrospective and prospective on Fridays to connect with each other both professionally and personally to share our wins, acknowledge our struggles, and crowdsource any previously unacknowledged risks to upcoming plans.
• A bi-weekly (every other week) sprint meeting on Wednesdays that serves as a check-in on project milestones, a showcase of completed work that needs to be presented for feedback or a decision, and a forum for discussing and aligning on the next sprint.

Some of us have a couple of extra planned meetings. For instance, Pat and I have a leadership meeting on Fridays following our retro. And Pat has a unified Growth+Education planning meeting with Janna, Karen (our marketing manager), and SJ (our partnerships manager) on Mondays before the staff meeting.

Beyond the day-to-day stuff, we incorporate the following strategic components into our operating model:

• An annual business planning meeting (in person) where big-picture ideas and continuous improvement opportunities are discussed and synthesized into detail to inform financial projections and culminate in actionable strategic plans aligned to our declared objectives and goals.
• Quarterly business meetings (sometimes in person) to review progress against the annual business plan, review status on individual strategic plans, identify necessary adjustments to our plans, exchange feedback, celebrate wins, and more.

Our governance model doesn’t come straight out of one book. Instead, as a process wonk, I’ve assimilated together different ideas and components from a variety of experiences I’ve had and sources I’ve encountered throughout my career. If you’re interested in this stuff, I encourage you to read The Agile Manifesto, The Hard Thing About Hard Things by Ben Horowitz, Rework by Jason Fried and David Heinemeier Hansson, and The Five Dysfunctions of a Team by Patrick Lencioni. That list is not an exhaustive one but it’s a great start. Those publications were among the most influential on my understanding of effective workflows and governance methods.

That’s a lot of ink on process and management. It may make you think that we’ve gotten all our process kinks ironed out. Far from it. While we’re pros at a lot of this stuff, we remain quite imperfect. In fact, this is perhaps the one area of our company that warrants the most attention and innovation as we further transform and grow as a merged team.

To close out here, breathe easy knowing that you shouldn’t over-engineer your business operations out of the gate. As we’ll hit on in a later chapter, all businesses go through different lifecycle stages. Each stage has unique characteristics and demands. Business dynamics should, therefore, remain somewhat organic so as to adapt and conform to the unique needs of a given phase.

That said, there are some perennial traps to avoid as you structure, operationalize, and grow your new venture. What are these common mistakes that risk ruin for your business? Find out in the next chapter!

7 Business Mistakes That Risk Ruin

When you run in business circles for long enough, you’re bound to hear the term “SWOT”, which stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT. analysis is usually performed as an audit by or for internal leaders possibly with the aid of outside advisors. The objective is to critically examine the integrity of the business to inform strategy conversations and decision making that will impact its future.

While each dimension of a SWOT analysis deserves your attention, “threats” commands special attention for a few key reasons:

1. Mismanaging threats can single-handedly break a business regardless of its strengths and opportunities.
2. Threats almost always have more potential energy to impact your business as compared to weaknesses.
3. In particular, internal threats to a business’s leadership team, culture, and operations can emerge early, quickly, and suddenly and with severe consequences.

It’s arguably overkill to perform a full SWOT audit before a business is up, running, and generating data worth examining. That’s why this chapter zeros in on just threats as those are integral to the foundation of any business because they’re attributes of your model, culture, leadership, staff, funding, among other things.

Specifically, this chapter explores seven common internal threats that can vex founders and entrepreneurs of all stripes. I have faced all of these myself, sometimes more than once and sometimes on an ongoing basis—which goes to show that threat management is never a one-time exercise. The identification, mitigation (at minimum), and eradication (at best) of threats is a perennial job function of entrepreneurs and leaders. Use this opportunity at the dawn of your business to develop this skill set if you haven’t already.

You’ll notice that all of these threats revolve around behaviors. That’s not coincidental. Threats take shape and become real when people make mistakes. It’s therefore useful to understand that behavior patterns are both the cause and solution to threats. If a threat exists, and especially if one is getting worse, then the underlying behaviors need to be identified, analyzed, and changed. Otherwise, the threat will persist, possibly metastasize, and risk ruinous effects.

With that grounding, let’s begin our study of risky behaviors that threaten a business:

1. Ignoring the time, attention, and empathy that makes for healthy partnerships

Relationship integrity among partners is paramount to the performance of any business. When a founding team invests serious effort into its chemistry—a combination of values, intentions, incentives, responsibilities, and skills—then its prospects for a healthy, productive, and long-lasting partnership are high.

Those prospects are like the stock market—always ebbing and flowing based on conditions that change in real time. Business partnerships that ride those waves with casual awareness and attitudes risk careening out of control and sinking their prospects. And it doesn’t take much for that destabilization to begin. Any number of behaviors can begin to tip the scales out of balance. Here are but a few:

• Disregard for partner check-in meetings. 
• Lack of feedback and accountability reviews on individual responsibilities.
• Dependency upon another partner to perform one’s own responsibilities.
• Inability to hear, process, and respond to bad news either at all or in a mature manner.
• Reluctance to express vulnerability. 
• Defensiveness when times get tough (e.g. a period of tight cash flow). 
• Egotistical perspective on the importance of one partner’s role versus another.

The above behaviors are, sadly, not uncommon when the pressures of a business begin to mount. Perhaps oddly, they’re equally likely to surface when successes begin to accumulate. It’s human nature to retreat into corners when times get hard as well as to desire individual recognition when times are good. If these instincts are left unchecked due to the disappearance or absence of purposeful investments (of time, attention, and empathy) into the relationship, then the relationship is primed for decay.

2. Believing that good marketing can make up for a bad business model and plan

As we touched on in the opening chapter, “your blog is not your business” is old internet wisdom that remains true. Whether it’s a blog, podcast, or other audience-centric channel, the marketing piece alone—while dazzling—is merely window dressing for the business itself. Even a YouTube channel with one million subscribers is worthless as a business asset if there is a non-existent or non-functional model underneath it.

Don’t construe this threat as hating on marketing. Marketing is a core business function and getting good at it is a worthy use of time and resources. The threat, instead, is more nuanced—namely, if you perfect your marketing without preparing your business to harness the attention that it generates in a manner that produces a viable profit, then your business is unbalanced with shaky-at-best prospects likely with a short life expectancy.

When revenues and profits aren’t where they should be, many entrepreneurs double or triple down on marketing. (This includes paid advertising like Facebook campaigns.) That’s almost always a mistake because if it works (by generating more brand awareness) it merely compounds your problem of being unable to profitably harness that attention. Instead, the better choice would be to streamline your already effective marketing operations to open up both time and capital that can then be reallocated to addressing the underlying business issues.

3. Disregarding the importance business agreements and contracts

Contracts—you may hate them, but you risk ruin if you rush them or run from them. So please, don’t, even if you see all of your entrepreneurial friends doing it. The liabilities that can result from half-baked or non-existent contracts aren’t anywhere close to offsetting the upside that you may think exists by choosing to defer your time and energy near-exclusively into the “fun” aspects of entrepreneurial life—such as ideation, networking, and marketing.

Frankly, being casual with contracts doesn’t pay. And the threats are plain: loss of financial advantage, exposure to costly liabilities and damages, forfeiture or difficulty claiming ownership of valuable intellectual property and other forms of business assets. Behave in the opposite way—get serious with your contracts to protect your financial interests, minimize your exposure to liabilities, safeguard your proprietary assets, and more.

The exact contracts that you’ll need to prioritize for your business will vary based on its type, model, and industry. Some common ones that may be candidates for you include your operating agreement, service partner contracts, master service agreements for clients and customers, terms of service, and employment agreements for your employees.

Do you need to become an expert in legalese? Heck no. Do you need to write contracts yourself? Absolutely not. Should you sign a contract that you haven’t read or don’t fully understand? Never. Get professionals to help you. Don’t be bashful about asking questions you may think are silly. And don’t cut corners. Serious entrepreneurs treat all manners of contracts with the utmost respect, which includes respecting the process it takes to create, negotiate, and finalize them.

4. Allowing friendships to cloud your judgment and decision-making

I dislike the phrase, “It’s not personal; it’s just business,” though it does speak to an important conundrum most entrepreneurs face: How do you balance friendships with performance in the workplace?

The key assumption here is that entrepreneurs lean on their personal networks to staff roles in their startup companies. Every entrepreneur I know does this to some degree. It’s not unwise; in fact, tapping into personal networks is an advantage to move at the pace that a new business requires to get organized and running. Moreover, there is a lot of intangible value that comes along with involving friends including established trust, communication patterns, enthusiasm for the vision, willingness to put in extra effort when it’s necessary, etc.

Challenges arise and risk becoming threats when friends are involved in low-performance situations, and there are plenty of hypotheticals:

• What if a friend drops the ball on producing a product, or some other thing, to your quality standards?
• What if a friend whom you entrusted with the company’s big holiday marketing campaign delivers sub-par results?
• What if a client becomes extremely upset and chooses to terminate a project because the friend leading that project is mismanaging the work?
• What if the friend making sales doesn’t fully vet the parameters involved with a new project resulting in an undersold contract with impossible expectations?
• What if the strategy development you’ve delegated to a friend comes back unfocused or inconsiderate of resourcing constraints?

It’s never a good move to avoid confronting those challenges just because you have personal feelings for those involved. Those challenges require resolutions, and resolving them is your job. It’s demanding work, and it’s gutting when it involves a friend. But when someone within your business—partner, employee, or contractor—is underperforming or behaving in a manner that is detrimental to your company’s ability to meet its commitments, deliver value, and operate successfully, then corrective actions are necessary. That should start with feedback. And it could end in dismissal or an exit of some kind. Never be heartless, just don’t allow your heart to corrupt your mind.

Am I guilty of committing this mistake? You bet. Whenever I do, I re-learn the lesson that the hardships experienced confronting and resolving performance and behavior matters when they arise pale in comparison to the hardships that result when such problems fester.

5. Operating a growing business with an unstructured budget

Budgets are the first and, sometimes, last line of defense against unhealthy spending patterns in your business. The patterns usually develop from minor expenses like buying your whole team lunch for all the extra effort they’ve put in recently. Other examples include small upgrades on flights, upgrading to a more powerful software platform, the next tier of internet service, and higher quality business cards. All of these expense types are valid. And stand alone instances of them are not that risky. It’s how much these expenses scale, and how fast, that matters. For instance: Buying your team lunch once a month is probably fine. Buying your team lunch daily is probably foolish.

There’s also the threat of developing self-destructive spending habits on things like overly lavish dinners with clients or prospects, attendance at multiple high-end events per year, and constant hardware upgrades just to have the coolest tech possible. If your business has the revenue and cash flow to support such activities, then perhaps those high-end expenditures are justified. But in many cases, especially in the early days of a company that may be largely bootstrapped, they’re not. And yet, entrepreneurs regularly overspend in these areas and put great financial strain on their businesses as a result. Why? One reason is pure vanity. Presenting a professional image for your business is important, but believing that you must spend money like it’s no object to create that image is not a strategy, it’s a trap to avoid.

Budgets alone cannot cure these habits, but they do provide guardrails that you can measure against. To start, work on budgets for your variable costs (e.g. discretionary spending)—such things as meals, entertainment, trips. These sorts of expenses are the ones in danger of getting out of control the fastest. Next, organize your fixed costs (e.g. mission-critical spending)—which may include such things as your payroll system, office space, utilities, and project management system. These costs are usually recurring in nature and should represent things that are vital to being able to operate your business.

I could write I whole guide on just budgeting (and maybe I will in the future). For now, beware of this threat and begin to mitigate it with some baseline structure around those variable and fixed costs. Hint: if you worked through the cost structure of your business model that we discussed in chapter 1, then you’re ahead of the game on budgets and likely in a very solid spot already.

6. Surrounding yourself with “yes” people who do not challenge your thinking

US President Abraham Lincoln famously surrounded himself with a “team of rivals” in his Cabinet, the people closest to him in his administration who informed his thinking and decision making. To make the best decisions possible toward healing some of America’s deepest divides and bloodiest wounds, Lincoln purposely created a context—the composition of his Cabinet—where he would be forced to listen to those who didn’t always share his ideas or reasoning.

Most entrepreneurs and leaders I know are familiar with this story of Lincoln. And yet, the majority of them do not actively court ideas and reasoning contrary to their own. That’s not a crime, though it does present a significant disadvantage when it comes to starting and growing a business. Companies operate on the basis of assumptions, early stage companies in particular. As we touched on in chapter 1, successful companies test those theories core to their business model to either validate or invalidate their ideas. Thus, without the willingness to invite and receive feedback that may invalidate a core idea, an entrepreneur risks creating a “false positive” in their head that their idea is genius when in fact it’s not.

Consequences of false positives present notable threats to startups. Here are a few: 

• Time and resources wasted on a new product, service, or experience that the market doesn’t want.
• The inability to seize an opportunity within the market that could have become a positive differentiator and advantage.
• Disenfranchisement of team members or advisors who perceive a faulty course of action that appears detrimental to the business.

Remedies to such isolated thinking and decision making can take different forms. To start with, consider an informal board of advisors comprising professionals you know and trust enough to tell it straight. Find folks from diverse backgrounds with different specialties. Incentivize them in some manner to stay engaged on your business and not BS you when tough matters need to be discussed. 

7. Being insensitive to your staff’s innate selves and skill sets

Startup companies are often chaotic ventures at first. Many entrepreneurs love those free-wheeling times where nearly anything goes so long as it sorta-kinda-maybe moves the business forward. That level of chaos, however, isn’t always perceived the same way by members of your team, especially those who are non-founders/partners.

Why the discrepancy between entrepreneurs and their staff? Two common reasons: (1) hardwiring, and (2) skill set.

First, whether you’ve hired someone on salary or on contract, those individuals likely aren’t wired like you’re wired. In other words, they probably aren’t entrepreneurs. That means that the excitement you feel from the chaos of rapid ideation and experimentation may come across as stressful madness to them. Generally speaking, people appreciate and prefer very clear parameters of what’s expected of them. The whims of a startup company often run the risk of violating those innate needs and expectations—by a little or by a lot.

Second, the individuals you’ve enrolled in the vision for your startup likely gravitate toward one skill set area versus others. Jake may be a really great writer who you’ve employed to work on your company’s content marketing. Sarah may excel at organization whom you’ve contracted to manage your projects. Keeping those staff members in their relative lanes of expertise is important to their sanity and productivity, even though you—the entrepreneur—may regularly fly in and out of different functional areas lending strategy, guidance, and production support to all.

Burning out your team is the cumulative threat you face as an entrepreneur employing or contracting others who may not operate as you do. It’s a big threat because a functioning team is essential to establish traction, generate revenue, and reach a point of sustainability that you can then build upon to grow your business. If you behave ignorantly or insensitively to such forces, you risk sabotaging your business from the inside.

At large, remember that behavior patterns are both the cause and cure of many threats to your business. Do a full SWOT analysis when the time is right for your team and business. Before that moment arrives, lean on these seven common threats as a preliminary health check. Do add to them if other threats are known to you. And work diligently to mitigate and manage those that present themselves even if they feel small. The startup phase of companies is a wonderful honeymoon period, but it can be short and harsh realities can set in quickly if you let them.

Once you do get things in gear while hopefully avoiding some of these common threats, you should spend some time concentrating on your operating systems. The right tools can make a world of difference while the wrong ones can be frustrating handicaps. In the next chapter, we’ll take a peek at the essential tools we use at SPI to run our business in the hopes that our experience can help inform your selection of empowering tools.

15 Essential Business Tools to Help You Operate and Grow

Tools can both help and hinder professionals in any industry.

[Note: Some of the resources below may be affiliate links, meaning SPI receives a commission (at no extra cost to you) if you use that link to make a purchase.]

When helping, tools are a means of organizing, planning, executing, sharing, and—possibly—automating some or all of your work. But when hindering, tools can easily become distractions from doing the hard work of growing your business. For instance, I’ve known many first-time entrepreneurs rush to sign up for a host of online systems (and begin paying for them!) without a coherent business model and go-to-market plan in place. I’ve also personally witnessed companies—including a few of my own—struggle with “tool switching,” which is when a person or team opts to change from one tool to a competitor for reasons that are usually of marginal, if any, value. The costs—direct costs as well as in-direct opportunity costs—can be severe and risk being crippling in the early days of upstart businesses when working capital is usually limited, everyone’s time is stretched razor thin, and forward momentum is just beginning.

Don’t get me wrong—I love tools as much as the next professional who nerds out about their craft and industry. That nerd-love is a big reason why it’s so easy to rush into over tooling your business. To avoid a fools-rush-in situation, remember this: tools are tools, not solutions. It’s which tools you use along with when and how you use them that ultimately generates value. For instance, just because a lot of folks are flocking to the latest project management software that, okay, looks better than the one you’re using doesn’t mean that taking time to re-platform all your projects over to a new system and start paying twice as much is a wise decision. In six months when your business is larger with greater and different forms of project demands? Maybe. Today, probably not.

So please—before we proceed—think judiciously about what tools are truly important for your business to function at this moment in its lifecycle. Those tools, and only those tools, are the ones you should be choosing to invest time, energy, and money into. It should go without saying, but I’ll say it anyway: never—ever!—spend money on tools you do not need. Just because someone else loves and recommends a tool—including us here at SPI—doesn’t mean it’s right for your business at this moment, or ever.

Speaking of us, we have spent years experimenting with dozens upon dozens of different tools across a range of business functions. Our tooling experiments were—and remain—concentrated on online software tools that support a digital-first business model, because that’s true for us. Most tools are okay. Some really stink. And a precious few are exceptional. The latter have become interwoven into our operations. Simply put, we could not operate SPI without these systems.

I offer up our experience with these tools in the hope that they will help inform your thinking and decision making about which tools may be most useful for your business. At the very least, I hope our tool categories help narrow and direct your focus into different functional areas that you might not have thought about before when it comes to tooling.

Okay, let’s delve into the 15 essential systems and tools we use to run SPI.

Operational Systems

1. Gusto—Gusto is a fantastic platform for payroll and extended capabilities like benefits management and paid time off (PTO) tracking. We use it for all of those services and for making certain vendor payments to take advantage of its automatic 1099 paperwork processing come end of year tax time.

2. Guideline—We’re proud to offer a 401(k) investment benefit to our team, managed via Guideline. It connects directly with Gusto so that appropriate deductions are withheld from the team’s respective paychecks per whatever selections they’ve made.

Financial Systems

3. Proprietary data models—We conduct our business planning forecasts, cash flow management, and related finance data modeling in a collection of proprietary Google Sheets. For forecasting explicitly, consider Dryrun.com, though we don’t use it.

4. Stripe—Stripe is a go-to payment processor that powers some of the best platforms on the planet, including our friends at Teachable. We use native Stripe to handle processing of payments for any of our subscription programs.

5. Harvest and FreshBooks—The internet is rife with systems for invoice processing. We’ve used many across our team’s collective experience online. Harvest and FreshBooks are two solid options to consider among the many.

6. PayPal—PayPal remains an element of our financial operations despite the many pesky quirks that drive online entrepreneurs like us batty. Mostly, we use PayPal as a vessel to receive funds and limit it heavily in terms of making outbound payments.

Management Systems

7. Monday.com—Monday.com has become our system of record for work. That’s a fancy way of saying it’s our go-to project management platform that all managers use. It’s a delight thanks to its intuitive user experience and comfortable views. Best of all, at least to me, there are roll-up views that allow me to see all projects visually mapped together.

8. CoSchedule—We use CoSchedule as our central content marketing calendar and production platform. In it, we’ve structured an automated workflow of tasks for the different pieces of content that we regularly produce and publish. Everything is tracked and easily malleable to our content needs. And it integrates directly with WordPress.

Communication Systems

9. Slack—I doubt that Slack needs any introduction. It’s the powerhouse platform adored by companies of all shapes and sizes for collaborative communications. We have our Slack workspace carefully architected with a variety of channels, each with a specific purpose. We’ve also developed helpful Slack guidelines to ensure that our affinity for using Slack doesn’t overtake our sensibilities for doing the actual work that matters.

10. G Suite—G Suite is Google’s business offering for its suite of collaboration tools including Gmail, Drive, and Calendar. Of the full G Suite, we primarily use just those three.

11. Dropbox—Dropbox remains our go-to cloud-based storage system. In fact, we just completed a large digital asset migration from a legacy Dropbox account to a new one. Business Dropbox accounts come with Dropbox Paper, which I have to say is also a good document platform. We dabble with it but still rely heavily on Google Docs for documents.

Marketing Systems

12. ConvertKit—ConvertKit is the best email marketing system in existence today. The intention that was put into designing the database for easy and meaningful segmentation is masterful. The drag-and-drop sequence builder is a gem. The available integrations with other key platforms is seamless. There’s so much to love.

13. RightMessage—One of our newer platforms of note, RightMessage is quickly becoming a permanent fixture in our marketing efforts thanks to its ability to personalize content and copy within an existing landing page based on known user data. RightMessage also has other products in its portfolio such as RightBar that we’re currently using.

Publishing Systems

14. Teachable—If you plan to create and publish online courses, then you need to consider Teachable. We have found it to be the best platform in its category thanks to its ease of use on the creator side, intuitive user experience on the student side, two-day payouts (Stripe only, not PayPal), and a host of other awesome capabilities.

15. Fusebox—Fusebox is where podcast hosting is included at no extra cost! A truly wonderful podcasting platform built for beginner and veteran podcasters alike. From an intuitive UX to a modern, fresh UI, Fusebox is a great platform to host your podcast and serve your audience with the industry’s best-looking players.

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Operating and growing a multifaceted online business is no slam dunk. Thankfully, these systems take a good amount of the pressure off. We streamline anywhere we can, and we automate whenever possible. For example, a fair amount of our planned email publications are configured in ConvertKit. And many of our back office processes, like payroll, are fully automated thanks to Gusto. Additionally, we boost our productivity through our communication systems, which are pretty good out of the box but also require a fair amount of intentional custom structure within them (e.g. your Slack channel information architecture [iA]) as well as disciplined usage through our own norms and rules.

Truthfully, we don’t use a single one of these tools in a plain vanilla form. We’ve worked hard to structure, integrate, and otherwise equip these tools to meet our company’s unique needs as well as our team’s unique dynamics. The same will be necessary for you, your team, and your business because, as I said, tools are not solutions.

It’s also worth emphasizing that you should enjoy the experimentation process with tools. Looking under the hood of new tools is a great way to challenge your thinking about how you’re running your business. You may discover ways of doing things that you would never have considered before if you hadn’t looked. Such testing is relatively easy these days, especially with regard to software tools. In many cases, you can sign up for free to give those systems a solid test run. Need more time for your trial? Just contact those companies and ask. In our experience, we’ve found that most are very willing to extend free trials if you’re expressing genuine interest in them.

Equipping yourself with tools is an empowering moment. Enjoy the process. Proceed with caution. Make good decisions. Be ruthless in your testing. And always put your business needs first. Do that and you’ll be in a good spot to discover a set of tools that become essential for you.

The Lifecycle of a Business

Birth. Infancy. Adolescence. Adulthood. Death. These phases of life don’t only pertain to living creatures. They are also the lifecycle phases of companies. And much like our mortal existence, the living experience of a company in each phase is characterized by different demands, needs, opportunities, skills, mindsets, etc.

Understanding the evolving lifecycle dynamics of companies has been a body of research for decades. Titans of industry such as Jim Collins have devoted their careers to such research to answer big, important questions like, “Why Some Companies Make the Leap and Others Don’t”—which happens to be the subtitle of Collins’ famous work, Good to Great.

This notion of lifecycle phases and the management consulting principles that underpin it may make you nauseous. I get that the average entrepreneur doesn’t want to be burdened with these thoughts. Instead, the prevailing priority during the early days is to focus on building the product—whether that’s a service-based or tangible product—as well as the launch and marketing of that product. During the birth and infancy phases of a company—a la the entrepreneurial days—that’s very appropriate. Your company will die a premature death if it doesn’t find genuine product-market fit quickly that can generate revenue.

But you don’t want to be just another average entrepreneur, right?

Whether you’re off to build the next great software product for your industry or establish the go-to agency for your space or achieve some other meaningful marketplace position, your company will find itself influenced by these inescapable lifecycle forces. As the research shows, those companies that perform best and last the longest are those that are led by individuals very aware and masters of these dynamics.

If you care to rise above average and angle your business toward living a better life, then let’s explore the phases of life that your new business is about to encounter.

The Lifecycle Phases

Famed British economist Alfred Marshall is often credited as the first person to develop a lifecycle model for businesses based on a living thing. In the late 19th century, Marshall compared companies with trees in a forest to describe their development patterns. His 5-part model is as follows:

1. Growth
2. Competition
3. Top position
4. Stagnation
5. Decline and (eventually) death

Marshall’s model was the unrivaled standard for the better part of 60 years. Then, in 1950, another influential economist, Kenneth Boulding, declared that organizations grow through the “same” lifecycle as living organisms, which he described simply as: (1) birth, (2) growth, (3) decline, (4) death.

Nearly two decades later—starting in the late ’60s and surging through the ’70s into the ’80s—the management consulting boom ushered in the golden era of organizational design principles and practices. That boom bore a range of revised lifecycle frameworks—all very similar to one another and more or less derivative of Marshall’s and Boulding’s original works.

I’m particularly fond of two models: one from Virginia Lewis and Neil Churchill, and one from Larry Greiner. Both provide context needed to apply the practical methods that we’ll get to later in this chapter. Let’s briefly touch on each of these models:

Lewis and Churchill’s 5-stage model is arguably the modern gold standard. If you only examine one model, choose this one. It’s rooted in an entrepreneurial mindset, which is helpful for those in the infancy phase of their companies. It provides for alternative growth pathways at each stage, a level of nuance other models lack. And it incorporates Greiner’s model regarding each lifecycle phase’s unique growth and crisis characteristics, the latter being critical to understanding how to successfully evolve from one stage to the next.

Greiner’s 5-stage model concentrates on what he calls the “evolutionary” and “revolutionary” moments of a company’s lifecycle. Evolutionary moments are periods of prolonged growth using established methods that work. Revolutionary moments are the turbulent times (e.g. crisis points) when growth is stalling because the established methods no longer work. The beauty of Greiner’s model is that the thrust of an evolutionary growth stage is the cure to the preceding revolutionary crisis.

Must you adopt these two models? Absolutely not. Feel free to apply any lifecycle framework that most speaks to you. Just make sure to choose a model that helps you very clearly understand what it’s going to take to get from your current stage to the next. The door to each subsequence stage is always represented by a crisis. As Gandalf might say, you shall not pass to the next stage of growth unless you take these organizational inflection points seriously. Let’s explore just how to do that below.

Growth Phases & Crisis Points

Puberty. Heading off to college. Getting married. Having a child. These events mark some of life’s most important, challenging, and memorable moments. Businesses experience similar lifecycle moments that hallmark entrance into a new phase of existence. And like big life moments, big business moments are always rooted in a fundamental change of being that is new and, therefore, uncomfortable and daunting.

Understanding your business’s lifecycle will illuminate these right-of-passage moments in a way that will help inform how you navigate them, from the exciting times of growth that require little operating change, to the challenging times of turbulence when the status quo no longer works and the resulting crisis becomes a transform-or-risk-dying decision point. It’s in these latter periods when companies that do not transform and evolve to accommodate new demands of the business will not survive.

Specifically, mastering the dynamic relationship between growth and turbulence is critical to successfully exercising your executive duties for your business. As the saying goes, what got you here won’t get you there. Or, as Greiner puts it, “Smooth evolution is not inevitable or indefinitely sustainable; it cannot be assumed that organizational growth is linear.”

The non-linear nature of growth is a concept that should be self-evident to anyone based on their own natural life experience. However, unlike the natural world where non-linear growth is common sense, the business world is full of entrepreneurs and founders who struggle to understand, accept, and master the non-linear nature of their companies. That inability to mature as a businessperson leads many promising companies to crash and burn at its first real challenge—a crisis of leadership.

The crisis of leadership moment is, I believe, the riskiest post-launch moment for any startup. This is when you, as founder and entrepreneur, need to examine yourself—your headspace, your ego, your skills, your needs, your behaviors, your strengths and weaknesses—to answer a serious question: Are you equipped to handle, by yourself, the organizational challenges that are characteristic of and unavoidable during this revolutionary moment?

That question isn’t likely to have a binary yes or no answer. More often, you are well equipped in some areas but not in others. The imperative at this moment, therefore, is to assess yourself and your organization’s needs and use those insights to find new levels of harmony among three key variables—personality, skills, and role—that align with the leadership demands. Such self-examination can be daunting to be sure, though when it’s taken seriously and performed honestly it can yield wonders that promote the caliber of maturity needed to successfully grow as a person and professional as well as navigate your business into the next major lifecycle phase. To prepare for this major right-of-passage moment, consider these practical actions. Moreover, if you happen to have a leadership team already, involve them in these actions too.

1. Read Rocket Fuel by Gino Wickman and take action on its recommendations.

It’s rare that a single entrepreneur possesses all the characteristics necessary to make a business successful. Wickman’s book delves into this subject by examining the relationship dynamics between a company’s two key roles: a visionary and an integrator. According to Wickman, “Visionaries have groundbreaking ideas. Integrators make those ideas a reality. This explosive combination is the key to getting everything you want out of your business.”

The concept itself may not be all that revolutionary to you. A healthy yin-and-yang partnership where two entrepreneurs join forces to complement each other is old wisdom. What I enjoy most about this book is not the illustration of the core concept itself but rather it’s deep, specific teachings about how to make such a dynamic relationship work. From personal experience, it’s the behaviors, not merely the labels, between these two individuals that make-or-break a business.

If you have a founding partner now who already complements you, great! Still, read this book, discuss its teachings, and implement those that you aren’t already doing. And if you don’t have a partner and feel that someday finding one will help you eclipse the crisis of leadership, then absolutely dig into this material and use it as a guiding framework in your quest for a complementary partner with equal capabilities as your own.

2. Execute personality assessments for yourself, any partners, and team.

Personality assessments are tricky. On the one hand, they can provide tremendously valuable insights into behavior defaults, communication preferences, and stress responses. On the other hand, they can be used as combative weapons to excuse bad behaviors, justify poor performance, deflect feedback, and admonish others. Personally, I find the value to outweigh the risks because you, as the person in charge, get to decide how personality assessment data is used within your culture. Use it wisely.

Wise use of personality assessment data helps calibrate fit between an individual and their role. If you and your team are new to such assessments, you may uncover some real misalignments within your organization. Perhaps you’ve staffed Sally into a management role when her innate personality is more prone for leadership work. Maybe David is in a creative role when his hardwiring prefers organizational structures and methods.

First and foremost, subject yourself to an assessment. Be open-minded to the results and use them as part of your broader self-examination to gauge your fit for the leadership challenges ahead at the end of the infancy phase of your business. That data may reveal some gaps that you can work toward filling with a combination of leadership training for yourself, recruitment of a partner (if you don’t have one), hiring of new staff, and more.

Which personality assessment is best? None, in my experience. Each one has pros and cons. Those that rise to the top include Myers-Briggs Type Indicator (the classic), StrengthsFinder 2.0, and the Enneagram. Lesser known ones include DISC, Personalysis, and the Birkman Method. The website 16personalities.com is a decent starting point if you’re new to this material. It’s based on the Myers-Briggs Type Indicator, presents the data in an engaging manner, and is free.

3. Develop a detailed RACI matrix for you and your business partner(s).

Who is responsible for what, both now and when the turbulent demands of a leadership crisis strike? Answering that question today may be difficult even if you do have a co-founder or partner with complementary abilities. And while investing time and energy into personality assessments can get you closer to an answer, they alone are unlikely to be enough.

This is where a RACI matrix can really help. The acronym—R=Responsible, A=Accountable, C=Consulted, I=Informed—is used to clarify important nuances of various work functions. For instance, you as the entrepreneur and founder, are Accountable for top-line revenue. That said, you may already have someone on staff in a sales or marketing role to whom you’ve delegated some revenue-generating responsibilities. That person is Responsible for that subset of work instead of you even though you remain Accountable for the results of that work. Additionally, if you have a business partner who leads operations, that person may still need to be involved in marketing strategies. In that scenario, the partner is Consulted on marketing, not Responsible for marketing.

I recommend that the practice of crafting and maintaining a RACI matrix becomes an organization-wide discipline. Jumping to that extent right off the bat, however, is probably over-engineering your business right now. So, to start, focus a RACI matrix specific to you and any partners you may have in aid of structuring your respective leadership duties. Getting those down on paper in detail now—and making sure that everyone is aligned to and accepting of them—is a mature move that will yield positive dividends down the road.

4. Evaluate leadership training options and experiences.

Getting outside your own bubble of thought is a good move, especially as the dynamics and demands of your business evolve. You may already have a counsel of friends whom you turn to with pressing questions. You may also already have a mastermind of contemporary entrepreneurs moving in a similar direction with their businesses. Both such group types can provide BS-busting feedback and wisdom to help you avoid missteps and overcome challenges.

For the big stuff, like the various lifecycle crisis moments, involving professional help may be the extra boost you need to succeed. Such help can come in various shapes. A business consultant. A leadership coach. An industry mentor. A professional association. An executive training program. One, many, or all of these learning environments may be desirable. Each one will look and feel differently, so choose with care. For instance, committing to a months- or years-long executive program will only be valuable if you truly have the time and focus to commit to it. Similarly, a leadership coach will only help you develop as a leader if that coach’s character, experience, and methods resonate with you.

Mind you, all consultants and coaches aren’t created equal. Neither are executive programs or professional associations. I’ve had mixed experiences and results with a few of these options. I’ve loved some and hated others. Before you head into any such relationship, with an individual or a program, really zero in on your personal needs as well as those of your business. The best advisors will never give you answers or force outcomes; they’ll develop your mindsets, principles, and skills to guide you to making the best decisions yourself. If you’re looking for a starting point, consider Seth Godin’s altMBA program. I haven’t experienced it myself but I know others who have and they’ve really enjoyed the curriculum, format, and community.

Becoming more self-aware, being receptive to challenging feedback, and working on your leadership and management abilities, you’ll become better equipped to rise above the ranks of average entrepreneurs. Better still, you’ll put your business in the best position possible to survive future trials of growth and flourish through more expansive phases of prosperity.

Once traction is found and growth begins, you may find yourself struggling to manage your operational growing pains. An expanding payroll. Heftier independent contractor payments. Tricker tax matters involving multiple states. Heightened seriousness with respect to all things human resources (HR). Extension of new benefits to entice new talent onto your team while retaining the talent you have. I’m familiar with the pressures of these growing pains. They can quickly sap your entrepreneurial energies. They can also, if mismanaged, put your business in real legal and compliance binds. Thankfully, there’s a single solution that we recommend for many of these growth woes, which we’ll geek out about in the next chapter.

Our Recommended Business Platform for Darn Near Everything

You may not need a digital HQ for your business on day one. But if your new thing has a special sauce to it that your market loves, then there’s a real chance that it’s about to boom. Don’t get caught off guard when growth strikes. And don’t let unmanaged growth wreak havoc within your organization. Instead, get things under control in a manner that can scale along with you by implementing a digital HQ.

[Note: This chapter contains affiliate links, meaning SPI receives a commission (at no extra cost to you) if you use that link to make a purchase.]

At SPI, Gusto is our digital HQ of choice. Yes, it’s a payroll platform. But, golly, it’s so much more than just that.

Gusto positions itself with a simple idea: “Grow your business with a platform that supports your team.” Its team-centricity is a big reason why we love Gusto. From its empowering feature sets to its delightful customer service, Gusto has dramatically lowered our stress levels running SPI while boosting our confidence that important matters like tax filings, HR documentation, and even benefits are appropriately taken care of.

Here are some of the biggest specific benefits to a business like ours:

• Automated payroll for the team that never misses, handles all tax withholdings and related filings, and produces year-end tax documents for everyone.
• Easy configuration of payments to 1099 contractors via ACH-like direct deposits that cleanly, accurately, and automatically handles those pesky 1099-INT tax forms.
• A standardized on-boarding experience for all new employees complete with intake forms, payroll setup, I-9 (and similar documentation) capture, etc.
• Administration of important policies like PTO allowances.
• On-demand access to certified HR professionals when you need advice on something that is way too important to screw up.
• Anonymous employee feedback surveys automatically sent and tallied monthly to ensure that you’re keeping a healthy pulse on your team’s feelings and feedback.
• Secure documentation retention to remain in total compliance with data privacy laws.
• Simple—and free!—benefits administration for health insurance (medical, dental, and vision) that automatically syncs with payroll.

Health insurance is a major win for our business. While we’re not required by law to provide health insurance benefits to our team given its size, we are proud to do so because of who we are as people as well as what we stand for as a company. Health care costs are real, and health care complexities can be overwhelming. Thankfully, Gusto makes searching for, offering, and administering benefits not only very manageable but—honestly—easy and almost fun.

Care to enrich your culture with even more benefits than just health insurance? We choose to do so and, as a result, lean on Gusto for expansive benefits for our team—namely a 401(k) plan. Our plan is actually administered via a separate platform called Guideline. Gusto and Guideline have a relationship with one another; the technical integration couldn’t be easier, and once it’s set up it runs beautifully in the background in sync with payroll.

Additional benefits that Gusto can help you provide include:

• Health savings account
• Flexible spending account
• Life and disability insurance
• 529 college savings account

And then there’s workers’ compensation (comp)—a sometimes maddening thorn in your side while trying to run and grow a business. In relative terms, workers’ comp rates are very low. For instance, at SPI, we pay less than $100 per month in workers comp charges. For such a low-level expense, becoming non-compliant with your workers comp status is not a risk you want to fool around with. Thankfully, Gusto saves the day (again) by seamlessly integrating with AP Integro, a platform that streamlines and automates all workers comp payments in compliant fashion.

In the grand scheme of things, Gusto is a steal for all the value we receive from it. We pay for their Concierge plan, which gives us access to their certified HR pros and advanced features. That top-tier plan runs $149 (base) plus $12/person per month. That does add up a wee bit, but we still deem it a grand bargain for all the headaches Gusto solves for us plus the savings we enjoy by not needing a full-time HR manager on payroll to handle all of this stuff for us in-house with less compliant systems.

For all the love we have for Gusto, it’s definitely not right for all entrepreneurs. If you’re truly new to the game without any employees and/or benefits needs, then Gusto may be overkill.

However, in a later lifecycle stage or phase, you should give Gusto a serious look at solving a good many of your growing pains. And when you do, you’re probably good to start off with their lowest level-tier, which runs just $39 (base) plus $6/person per month. We put our full weight behind recommending Gusto because we emphatically believe in them and the value they provide to entrepreneurs.

Experiencing growing pains now? Dreaming of a simpler way to manage contractor payments? Want to get compliant without the headaches? Then check out Gusto now. Even twenty minutes of research into their capabilities will prove to you that there’s an easier and wiser way of running your business. If you sign up through our Gusto link (yes, it’s an affiliate link), then you’re eligible to receive a $100 Amazon gift card. To qualify, all you’ll need to do is run payroll.

As we’ve explored throughout this business fundamentals guide, behind the scenes business dynamics are serious make-or-break subjects. Please do continue to be scrappy, creative, and malleable as an early-stage entrepreneur. Please also balance your enthusiasm for the outward aspects of your business with the inward ones. Platforms like Gusto are here to help with the latter if and when you need them. Overall, prepare to build not only a blog (or similar marketing channel) but rather a business—something that can operate wisely, empower others, scale through the good times and bad, become sustainable, and—through it all—achieve your dreams.