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Lessons from an Entrepreneur: When to Boostrap vs. When to Invest

News & Blog

In my last post, I touched on how we didn’t plan appropriately for a business, so when it started taking off we were stretching our resources thin. We were bootstrapping, as a lot of entrepreneurs do, using savings and credit cards to buy things and pay bills.

One of the areas we needed help with was setting up our business. We felt a little out of our depth and decided to hire an attorney. We went with a solo attorney vs. a firm, to save money and he handled all of the paperwork for getting us established as a corporation, with multiple owners. However, in the end, we would have saved money in the long run by spending a little more on this initial paperwork.

Go with the very best you can afford, not the cheapest.

The attorney we chose was quite the entrepreneur himself.  I’ll call him “Sam”.  Sam was working on a book of chauvinist jokes with cartoons.  He had a graphic artist who was developing these cartoons, and Sam was writing the jokes, as I recall.  He wanted to barter with us to develop a website for his book.

Did we run?  Nope.

Little did we know, Sam was also a budding horticulturist and apparently pretty good.  He had a “garden” of approximately 200 marijuana plants growing on his property.  We worked with him until his license was suspended.  He is practicing law in another state now, maybe a marijuana-friendly state.  Clearly, we should have run!  In the twenty years, I have been in business, going with the least expensive rarely pays off.

April 2001 

The first office we moved in to was small and homey.  We hired Rob who moved from Atlanta and became our Creative Director, as well as John who commuted from the Peninsula to be our Senior Developer.  Tom was selling and I was building websites.  It was an exciting time. 

We were getting our name out there and starting to pick up larger jobs and larger clients. 
I was spending a lot of time trying to put some structure around the company with policies, procedures, and processes.  I used to seat my friends at tables in my garage and give them crayons and pencils and assignments, like a school teacher.  It’s just what I do.

Build on your strengths and get involved.

I was introduced to an organization called NAWBO (National Association of Women Business Owners) and after the first meeting, I joined and got involved.  I was looking for other women business owners to talk to about how they were paving their way through this way of life, which was still very new to me, running a business.

It was an amazing opportunity for me to learn, grow, and meet some people who have become lifelong friends and mentors.  I served on the board and eventually served two consecutive terms as Chapter President, which was perfect for me – lots of organizing and documenting, etc.

I also served on a national committee and traveled around the country.  I was able to meet and learn from some pretty special women.  I highly recommend being involved with an organization, as closely aligned to where you are and want to be, at all times.  Nothing bad comes from that.

Our first big client:

We bid on a job out of Michigan for a futures trading platform.  After some initial phone calls, they flew Tom to Michigan, via private jet.  While there they took him to dinner and the owner of the company, Todd, who was a pilot himself, told Tom about an experience he had with a student he was teaching to fly.

He was a flight instructor in a previous life and was flying with one of his students.  They would fly down into this ravine and then back up before a bridge, which had cross wires under it.  The winds were preventing them from pulling back out before the bridge.  Todd knew that it would take a miracle to fly under that bridge without crashing.

He told Tom that he looked at his student and said, “I’m sorry”.  The student wasn’t aware of the challenge ahead and confidently said, “It’s okay.  I’ll just go under the bridge”.  The student didn’t realize that Todd didn’t apologize because they had to go under the bridge.  He apologized for them being in a situation where they would likely die.

The next day Tom was to fly home on the same jet he arrived in, but was late to the airport and missed his spot.  So Todd said it was no big deal, HE would fly Tom back to Virginia.  Todd was a super guy and he and Tom hit it off, so he was glad to have the opportunity to continue the conversation and hopefully, close the deal.

Not long after they take off they are over the Ohio River, the weather is beautiful and life is good.  Until they hit a bird.  The engine caught on fire and Todd tells Tom he’s going to have to nose dive to try to put the fire out.  He looked at Tom and said, “I’m sorry”.   Tom’s obvious and immediate thought, “are we going to die?”.

Take nothing for granted.

They managed to land safely, fire trucks, and ambulances on the ground ready to put the fire out.  I think Tom kissed the ground when he got off the plane.  He called me as soon as he could to tell me about what just happened.  Before we could get off the phone, Todd had already rented another plane to finish their journey.  Reluctantly, Tom got on that plane and they landed safely in Norfolk.

We got the project and hired two developers to work on the trading platform. Once the software was live, business went through the roof for Todd.  He had a community of investors who trusted him before this platform, and now he was growing so fast we were making plans for setting up a data warehouse for him.

Just as abruptly as hitting the bird, Todd called one day, “shut it all down, immediately”.  We watched the chatter on the message boards and learned the FBI had shut his office down and Todd was under investigation.  We had to let the two developers go. Luckily for us, the leasing agent (who we had just signed a multi-year lease with for a data warehouse) was compassionate when hearing our story and let us out of the contract.

We were interviewed by the FBI to see if we knew of or were in on the illegal portion of what was going on.  What Todd did wrong had nothing to do with the software or trading side of his business.  We were all cleared of any involvement, but Todd went to jail for several years.  My understanding is he made everyone whole as he wasn’t stealing, just not processing the money correctly.  He’s been out for some time and he and Tom stay in touch.

I remember the biggest impact this had on me was the thought of his wife and two children, who were the same ages of my two boys, and what they all must be going through.  It was also the first time we had to let anyone go.

September 11, 2001.  

We were all in the office that morning and heard of the series of events from the Internet.  When the second plane hit I left the office and picked the boys up from school and took them home.  I purchased four small TV’s for each of us at the office. 

I knew this was going to be a distraction that we would all want to pay attention to for some time. Tom was still in the Navy, using up his leave.  His immediate instinct was to stay in, but they wouldn’t let him.  

The same rule for hiring an attorney applies when hiring an accountant.

I’ve always had an affinity for older women, especially in business.  Maybe because they are the trailblazers who have paved the way for me, so I have a lot of respect for them.  Someone referred an accountant, Pat, to me and we immediately hit it off.  She was older and worked with her husband.  She helped me with payroll and our basic accounting needs.

The first year we made a good amount of money and for the first time, we needed someone else to prepare our taxes.  Our new accountant seemed like the obvious choice.  She scheduled an appointment for Tom and I to come in to review our returns.  We were oblivious to what she was about to tell us.  In a very nonchalant manner, she let us know that we owed more than $20k in taxes for the previous year.

I was devastated because I was responsible for the books, so I should have known and prepared us for this.  I also felt blindsided, as I had developed a friendship with Pat and she knew what we were making and paying in taxes.  She knew things I didn’t know and I assumed she was looking out for me.  How did SHE let this happen?  I took it personally and when I left her office in tears, I never saw or spoke to her again.

We had a new attorney who referred us to a new accountant, who worked with us to re-do our returns and get our books set up properly.  I would say I have the same recommendation when looking for an accountant, don’t go with the least expensive.  I don’t think that was the determining factor for me going with Pat, but I’m sure it was part of the decision.  I know CPA’s can be costly to work with, but I promise they will save you money in the long run.  We do as much as we can internally, so when we do need the professionals to help us, it’s money well spent.

Be proactive and never assume.

So now we had the right attorney and the right accountant.  This bus was moving!  It had been about eight months in the office when John resigned for personal reasons.  Within a few months, Rob had left too.  No drama around this.  It was a chance we all took together and it didn’t work out as planned.  We are all still friends and have consulted and/or worked with each other since then.  They will always be a part of the history of Web Teks.  They both left their mark, Rob’s in the form of our logo and brand for several years.

Coming up next, let’s talk about employees… the good, the bad, and the humorous!

dyanne

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