The Accidental Entrepreneur
26 Apr, 2012
Chapter 2 – Getting Started, The First Three YearsI am a researcher, that’s who and what I am. And I am a Hispanic researcher, dedicated to bringing the voice of the Hispanic population to the people who need to hear it – including government, foundations, health care professionals, manufacturers and service providers. Being very frustrated with my work situation and needing to make a break, I did it. After ten years of working for other people, I decided to go out on my own and see if I could live not only my passion but fill a void in the research marketplace.
The decision required me to look at what was needed to not only hang out my proverbial shingle but build a company. I needed to think about the infrastructure that was needed to be able to work with real clients! Now I had to build it. So I refinanced my house, which at the time had risen in value, and I had the princely sum of $35,000 to play with. I gave notice to my employer who begged me to extend my departure from two to four weeks so they could look for someone to replace me, which I did. I didn’t want to leave a trail of bad blood behind me.
I was determined to establish a real company, not just the semblance of a company, as I knew that the path to having a Hispanic research entity take hold was a long one. First decision to be faced: what would be my legal entity? So I found a lawyer and got incorporated. I was so focused on the permanence of my company that I rejected the normal S-Corp option and founded my company as a C-Corp. There are many disadvantages of a C-Corp and many advantages of an S-Corp, but I went with the C-Corp for one simple reason – an S-Corp has to have the calendar year as its fiscal year, and a C-Corp can be any date, so I went with that and picked March 1st as the start of my fiscal year. That way, when the inevitable profits would start flowing in (yes, I was that naive), I could take them in February and not have to pay taxes on them until April of the next year. Also, a C-Corp also allows you to have retained earnings to build the value of your company, but not everyone cares about that. This legal process cost money, but it was the foundation of my company thus it was well worth the expense.
In hindsight, if I were to advise someone on how to start up a company, I would suggest an S-Corp as this structure allows you to carry both profits and losses straight into your personal taxes which can be appealing to investors who most people are wise enough to seek. But ultimately you have to consider your personal situation and listen to the advice of your legal counsel.
The next steps on infrastructure
The next step was building an accounting function. I was not going to go into this business without a firm commitment to keeping careful books that met legal requirements. This was a fairly expensive decision, but honestly I think it was the smartest thing I ever did and I kept that up for all 21 years. I hired an accountant, the first of only four in two decades, and one of my ex-colleagues soon joined me and she started to keep the books. What did I learn from this? Challenge the software decisions and stay involved with the accountant as your right arm! Our accountant picked a software package that was quite arcane and more complicated than we needed, but we followed his advice anyway. Ask why this and not that – take the time to study the issue as it’s a big one.
Now I was on my way, yet the big decision was looming. Office space or no office space — that was the question. This was a scary step, as it was a big expense and an even bigger commitment. Yet, I did not want to just work off my kitchen table, even though that would have been cheaper, and on the expectation of needing space for employees, I decided to find real offices. First issue – where? I was living out near my old job, but I wanted the company to be in town, near the Latino community and its large labor pool. I decided to go ahead and give myself an hour commute each way, but I figured I could sell my house and move at some point. That plan was thwarted when the market dropped and I was underwater on my house for a decade. So I commuted.