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In a culture like Silicon Valley, successful business people recognize that some (much?) of their success is dependent not on what they know, but who they know.  As the phrase goes, the size of your network determines your net worth.   As a young businessman in San Francisco, I was able to call or e-mail almost anyone in the region and get 15 minutes of their time.    Within a few minutes of starting the meeting, I would know clearly that (a) they thought I was an idiot or (b) we might have something to talk about, but at least I was able to get advice and lessons from almost anyone.

Contrast that to Athens.   We bemoan the lack of a cohesive business community in this town, but it is like pulling teeth to get 15 minutes of time from many of the successful business people in town.   There have been times when I have even been asked to PAY for meetings! That’s insane.  Someone who does this, is short sighted by valuing immediate monetary gain over a potentially rewarding (both financial and otherwise) long term relationship.  Stop worrying about what’s in it for you and open yourself up to a world of possibility. This mentality of immediate gain will enfeeble Athens more than many other traits.   Let’s start thinking bigger as a community and stop trying to grab tiny pieces of the pie.   A funny thing happens when people start opening up and sharing ideas and challenging each other – everybody is better for it.

As a corollary, don’t do this.  If you think that what I am saying is stupid, tell me.  Don’t smile and then write me off. I won’t learn and you are disingenuous.  If we’re simply patting our fledgling business owners on the back and telling them they are awesome without challenging them, we’re never going to grow business in Athens.  I think some people believe this disingenuous behavior is called Southern charm.  It’s not. And it’s harming our business community.

Follow the role of Mark Suster – take 50 meetings a year and be honest (and polite!) during them.  They might just change your life.  And they’ll definitely make the Athens business community a more welcoming, challenging and encouraging environment.

Finally, in deciding what organization structure your company should have, you need to consider future growth.  While it is always possible to convert from one organizational structure to another, it is expensive – new filing fees are just the beginning – and it could be cumbersome with regard to record-keeping and external contacts.  If you plan for future growth at the time of your initial organization, the process down the road will be smoother.  Do you want to dilute your ownership stake as you gain investors or can you issue additional shares of stock?  Will your proposed organization allow for the easy addition of subsidiaries if you need to segregate business lines?  Do you have a mission statement that will keep you focused on that business in which you are most experienced or do you want to allow for expansion into new and completely different areas of business?         How much control do you want over any future expansion?  Draw a dotted line across the page at the bottom of your current organizational chart and in a different color ink, draw what you want your company to look like in 5 years; then figure out how that affects your organizational structure choice.

The bottom line is that you need to think carefully before you decide which organizational structure works best for your company and before you file anything with the Secretary of State.

(stay tuned in the coming weeks for Ginny’s next legal blog post:  “What are my choices for company organization?”)

Hanks received his BBA in Risk Management from the University of Georgia in 1990 and is now a professor in the Terry College Department of Management, as well as the director of UGA’s Entrepreneurship program.  Read more about him here.

To reserve your seat at this event, please RSVP today!

One of the biggest considerations of company organization is taxes.  For federal income tax purposes, LLC’s are not recognized as an entity.  Therefore, limited liability companies need to select how they want to be taxed: as a sole proprietorship, a partnership, a “C” corporation or an “S” corporation.  C-corporate profits are generally taxed twice, once when the company makes the profits and again when they are paid out as dividends to stockholders.  For this reason, many companies in Georgia are organized as something else so that the income flows through the company and is not taxed until it is included on the owners’ (members’) personal income tax filings.  There are also other tax considerations – payroll taxes, sales taxes, occupation taxes (otherwise known as business license fees) – that can have an effect on how the company should be organized.  Owners should always consult with their accountant or a tax attorney to decide what their tax exposure is and how to minimize it.

(The last post in Ginny’s series will focus on how to allow room for growth within your business.)

Café Murder is an iPhone game based on the already existing and popular restaurant games, but with an added (murderous) twist.  Come test your skills at serving customers while also protecting them against the crazy chef.  Read more about Café Murder here: http://onlineathens.com/business/2011-12-31/local-men-launch-iphone-game-help-kickstarter-funding.

This is just part of the fun we have in store.  Come see for yourself what other exciting developments are going on in Athens!  Pizza and beer will be provided, as usual.  Smartphone/iPhone not needed to participate.

To ensure a spot at this Demo Night, please RSVP today!

One of the first legal issues a new company encounters is how to organize itself.  This first decision can affect many other legal issues down the road, and there are several considerations that should go into this decision, including the owner(s), human resources, taxes, and projected growth.  You need to create a plan of how the company is going to operate, and how it is going to grow, before you can consider the different forms your company can take.

The first thing that needs to be considered when deciding what structure your company should take is the ownership.  Is it a single owner or a team?  Are the owners hands-on or investors?  How sophisticated are they and what is their business experience?  How do they plan to divide the different areas of responsibility for the business?  A single owner has more options than a team, but a single owner may have to bring on employees sooner than a team of hands-on owners who work together.  Corporations have more regulations and a more defined structure that might not fit the casual organization that you want for your company.  The more people involved in decision-making, the less nimble a company can be in making adjustments to market conditions (the “drop back and punt” factor).  Sit down all the owners of the company and draw up an organizational chart, mapping out responsibilities.  If you don’t know all of the tasks that need to be included, talk to other companies in the same business and/or that you admire.  Figure out if compliance and regulatory oversight is important.  How complicated do you anticipate your finances to be?

The next consideration, related to ownership, is human resources.  Do you need employees?  Can you use independent contractors or do you need workers who are directly responsible to you?  Can you pay on a 1099 form or do you need to set up withholding?  What about workers’ compensation insurance?    Any company with 3 or more employees is required to have workers’ compensation insurance.  However, up to 5 corporate officers or limited liability members can be exempt from coverage if they file the proper certification of exemption and their exemption takes the number of employees to zero.  Once there is one employee hired, the corporate officers or limited liability members are added back in and workers’ compensation is required.

(Ginny’s next post in the series will discuss tax considerations new business owners must address.)

On the other hand, I do not believe that fear of the prospect of failure and financial ruin is a motivator. I believe that the knowledge that I have survived those times when I have had nothing and had to start over acts as a safety net to allow me to take risks and keep moving. As I often tell folks “They can’t kill you and eat you.” The worst that can happen is you get to go camping and eat a lot of ramen for six months while you regroup, but you can get up and go again.

Ricky Steele, who spoke to the Four Athens community a while back emphasized that failure is not the same thing as quitting. As an entrepreneur, you can learn at least as much from failure as you do from success. The important thing is that you get up, dust off and keep moving. If you are motivated to do that by fear or the knowledge that you have survived doesn’t really matter. It is the act of moving on.

When you are creating your team, you need to remember that you are not starting a high school club.  You are selecting the caretakers for your dream.  In the same way that you would choose someone to  care of your child, you want competence, knowledge and caring in someone who shares your vision,  not just of how things should turn out but what should happen along the way.  At the same time, as Paul Graham says you shouldn’t “start a company with someone you dislike because they have some skill you need and you worry you won’t find anyone else.”

There is no formula for how to do this.   Take your time, remembering that building the team is the most important step in starting your business. And while having to lose a teammate down the road will not kill your business, it is a messy distraction that you do not need.

Space is limited, so please RSVP today!