Before you start your first business, do a relevant project. Businesses have overhead. Projects don’t.
If you tell me you’ll pay $20k for a solid developer hire, and I think I might be able to dig up someone great, then I don’t need to go off and set up a headhunting company. I just need to do a project.
A while back I had visions of setting up a game company. Before setting up anything official, a couple buddies and I did an educational game project with a local university. They paid us some money and we made the game. There was no company — just individuals collaborating. And it turns out I didn’t really enjoy it. Thank goodness I learned that with a project before setting up a company and depending on it for my rent. Even better, it was learning that paid for itself.
I talked to someone the other day thinking about setting up a new kind of events travel company. She would take groups of a dozen people to a special place for 2 weeks and produce the entire experience as if you were a trip through a personalised theme park. She even had access to a perfect first location.
Step one? Projectify that business into a single trip. See if it’s profitable and see if it’s fun.
This works better for service businesses enabled by technology than it does for pure tech businesses. Still, the lines blur. For example, I recently used an in-person workshop to convince myself to build a web app.
Projectifiable businesses are terrific. They’re really safe to get into because you can find out if it works before investing anything to set them up. If you don’t like it or it isn’t working, you can also call it quits after the project without breaking any promises.
A good project is:
- Doable (you already have the resources you’ll need)
- Profitable (it pays for itself & proves the biz model at small scale)
- Fast (a project taking a year may as well be a business)
- Similar to the workings of the real business (useful learning)
You don’t want to get stuck doing projects forever. They tend not to scale. Use them as a way to prove to yourself (and anyone else you’re depending on) that the idea is a business and–importantly–to find out if it’s a business you’ll enjoy running.
 I’m using “overhead” to mean anything you spend time or money on other than delivering your value proposition. To do a web development project for someone, you just need to shake their hand and start coding. To set up a web development business, you suddenly want a new website, blog, business cards, etc etc.
 $50k, which, incidentally, isn’t really enough.