On Product Development and More...

After being in the technology industry for over 20 years and having worked for a variety of companies both large (including Hewlett-Packard) and small (including several early-stage software startups), I decided to pursue my latest passion - going solo.

Recently, I started a software consultancy called Vertex Solutions. Our mission is to help companies deliver successful products that meet customer/market needs and are delivered on-time and on-budget.

We enable companies to optimize their end-to-end product development process (from product inception to launch) by leveraging our expertise in product management, program management, quality management and business process engineering.

But this post is not about my new venture per se, but more so about the steps I went through to start my company. I felt that what I learned may help others who decide to "go solo" at some point in their career.

Step 1: Secure Medical Insurance
I included this as the first step because I would not attempt to "go solo" if I was unable to get Medical insurance for my family. Based upon my experience, it can be quite difficult to get medical insurance - as the underwriters scrutinize everything looking for reasons to either substantially increase your fees or reject you outright.

We were "lucky". While we were rejected outright by one insurance company, another company accepted us, albeit with increased fees. Good thing the family is healthy and no one suffers from one of those "prior conditions".

Step 2: Define a Service Offering
For me, this part was an easy step. I have been working in the technology industry for the past 20+ years, the last 15 years in both a product management and program management capacity. I have helped companies define, develop, build, test and launch leading edge products (during my career, I have successfully defined, built and released over 30 products). And doing that as quickly and cheaply as possible. My service offering will be more of the same.

Step 3a: Choose a Business Name
For this, you have several choices. You can either create a Business Name that includes your legal name (e.g. "Doug Levitt Consulting") or create a Fictitious Business Name (in my case, I chose "Vertex Solutions").

Ideally, your business name will somehow link to your product or service offering. I chose "Vertex" because it connotes "things" (in this case lines) coming together to a single point. Exceptional product development (from concept through launch) requires excellent teamwork. People coming together for a singular goal.

Step 3b: Register a Domain Name
Ultimately, you will want to register a domain name for your business. Before finalizing a Business Name, you will want to verify that a suitable domain name exists that will complement your selected Business Name.

I used GoDaddy.com to search for available domain names and later to actually purchase my domain ("vertexsolution.net"). Before purchasing the domain, I found an online coupon (via Google) and was able to save %20.

As a note, one thing you need to consider is the importance of having a domain ending with ".com". Or are you willing to "settle" for a domain ending with ".net", ".biz", ".us" or something similar?

Initially, I was hoping to get a domain ending with either .com or .net. I learned quickly that most "good" two-word combinations (e.g. "Pinnacle Solutions", "Optimal Solutions") are already taken for domains ending with both ".com" and ".net". Because of this, I iterated between Steps 3a and 3b until I decided on VertexSolutions.net.

Total Cost: $23.01 dollars (valid for 3 Years)

Step 4a: Register Fictitious Business Name
Since I planned to use a Fictitious Business Name, I was required to register it with my local county.

Total Cost: $34 dollars (valid for 5 Years)

Step 4b: Announce Fictitious Business Name
As part of the registration process, I was required to publish (as a public announcement) a Fictitious Business Name Statement in a local newspaper for four consecutive weeks.

I am not quite certain I understand why this requirement still exists. Particularly since the number of people who read through the classified sections of the newspapers is rapidly dwindling.

Total Cost: $40 dollars (to publish for 4 consecutive weeks)

Step 5: Obtain Business Tax Certificate
My city does not require a "Business License" for my type of work (professional services). Instead, I am required to have a Business Tax Certificate. Effectively, any business in my city is required to pay an annual tax (for doing business in the locality).

Step 6: Purchase Insurance
Some companies (but not all) may require you to have insurance for one or more of the following:
- Commercial General Liability Insurance
- Automobile Liability Insurance
- Workers Compensation Insurance
- Errors and Omissions Insurance

I purchased a Commercial General Liability Insurance via a broker. I already had Automobile Liability coverage, but did need to increase its limits. Fortunately, I did not need Workers Compensation Insurance in California because I am a sole proprietorship and not employing anyone (at least yet).

Regarding Errors and Omissions, that's an interesting one. My understanding is that individuals purchase Errors and Omissions insurance in order to cover potential liability due to negligence. And, the policy can be quite expensive especially at higher coverage amounts. If you want to avoid purchasing this type of Insurance, make certain that you are not liable for negligence. Otherwise, purchase the Insurance.

Step 7: Establish a Bank Account?
It is always a good idea to physically separate the monies set aside for business and personal use. Amazingly, I was able to get a free business checking account AND receive a $100 bonus. I suggest spending 15 minutes searching the internet for deals on setting up new business checking accounts.

Step 8: Set up an Email Address
As a free service, GoDaddy allows me to create up to 100 email aliases (dlevitt@vertexsolutions.net,info@vertexsolutions.net, etc.) that can be forwarded to an email account of choice. I decided to manage all business email using my personal Gmail account.

Note: If you are using Gmail, you will want to update the configuration setting such that email replies are always sent "from the same address the message was sent to". Go to the "Settings" area and choose the "Accounts and Import" tab to do this.

Step 9: Create a Web Site
As a free service, GoDaddy provides a web site that includes up to 5 pages. This "Free" web site has a serious downside - it renders GoDaddy advertisements at the top of each page (and, as a result, does not look very professional). My web site currently is a work in process. Once my messaging is down pat, I plan to upgrade to a premium service provided by GoDaddy.

Step 10: Create a Blog
It is important to maintain a professional blog these days. I evaluated both Blogger and Wordpress and decided to use Blogger (primarily because it is owned by Google). Currently, the Web Site and Blog have a different look'n'feel. I hope to have a better integrated solution in the near future.

Step 11: Purchase Business Cards
You need business cards to be considered legitimate. I liked using Vista Print because it allows you to create professionally looking cards for a relatively low price. I created a business card that included my own logo (a royalty free logo that I purchased from IStockPhoto.com). The total bill (including shipping and handling and tax) for 250 cards, 1 pen and 1 stamp was $16. As with everything else, I suggest you look for coupons.

Step 12: Establish a Billing Rate
Your potential clients will inquire about your rate. You need to first understand how the market values your unique set of skills. Then, you need to determine how you want your clients to pay you.

A consultant can be paid in a number of ways: W2, 1099 or Corp-to-Corp. You need to vary your rate based upon how you will be paid (because each option has different tax implications).

Step 13: Hire an Accountant
Since I chose the sole-proprietor route, I am responsible for making quarterly estimated tax payments (based upon estimated revenues and expenses). Fortunately, I already had an accountant. If you do not, I suggest hiring one.

Step 14: Find Your First Client
This is the most important step. In fact, I began looking for my first client once I decided to "go solo". Unlike the other steps, this one can be quite difficult. Particularly in this current economic environment. I suggest tapping your immediate network for leads.

Step 15: Negotiate a Contract
Once you find your First Client, you will need to negotiate a contract. I recommend a careful read of the contract you establish with that client. It is in your benefit to get everything in writing.

And remember, if you want to avoid purchasing Errors and Omissions Insurance, make certain that you are not liable for negligence.

Once you have your first contract, you will likely want to use this as a template for all future engagements. You may want to solicit the advice of an attorney for this. There are resources out there specifically for helping small businesses get off the ground.