Erica's three simple rules for starting a business

To be fair, this blog post is long overdue. I’ve been asked to write it many times. Obviously, being an entrepreneur and working with hundreds of startup companies and sole proprietorships (who are my primary customers), I’ve watched a lot of businesses start and fail, and some succeed. Most really struggle. And Simpli has its struggles too. I have really long days (I think 32 hours was my maximum working-and-not-sleeping-at-all period, and I hit that last month, with a 30-hour stretch about a year ago at this time as well.) It’s somewhere in the midst of all that exhaustion that I always wonder if it’s worth it to run my own business. And the answer, at least so far, and for me, has always been “Absolutely.”

As Simpli celebrates its fifth anniversary, and I celebrate having built this thing from practically nothing and marvel at how large it’s gotten (I can’t believe we’re about to book our millionth dollar of revenue!), I feel it’s time to start properly documenting the journey I’ve had and my rules for starting a successful business.

I’ll take a step back now and expand on a little bit about why I started Simpli and why the heck I went into web hosting instead of [insert other business here].

Interestingly enough, the signs usually tell you when it’s time to start your own business. I officially claim the “start date” of Simpli as July 27, 2001 — the day that I signed a colocation contract in San Francisco for a company I then called ShakaDesign.com. At that point I had a few friends hosted on a box at my house; I had colocated servers before and even charged for web hosting before, but that was the day when I decided to make it official and say “Hey, I’m actually going to run this as a business and have colocation expenses and whatnot.” The colo expenses were a little over $100 a month, and I figured that if I had enough profit to pay my cable modem bill every month, I’d be doing well.

I worked at Sun Microsystems at the time, having worked for Cobalt Networks (little blue boxes YAY!), which then got bought out by Sun. I loved Cobalt; in fact, Simpli’s first 4 servers were all RaQ4s. I hated working at the Sun monster. (I think I’ve blogged about that plenty… suffice it to say that a corporate culture built on negativity and a complete disdain for the simple-but-elegant Cobalt user interface forced me out of Sun pretty quickly.) I figured that my ticket out of Sun Micro would be web dev and consulting, which was my biggest passion back then. I was an expert PHP developer by that point, so in my free time I hung out in #php on openprojects.net (now freenode) and solicited web hosting clients there.

In May 2002 I finally found my way out of Sun for good, spurred on by one of Sun’s weird programs where they paid employees to leave (I took an option to leave and got paid severance, as I guess they figured giving people the option to leave was cheaper than forced layoffs. And I’m happy to say I QUIT!!!) I also took a web dev contract with a company that would pay me enough to survive the summer. And that’s how it went — Sun Micro was my last “working for the man” position, and I’ve been on my own ever since.

I really thought web dev would be my primary job for years to come and web hosting would continue to be a side job. I figured I’d just host my clients, make a few hundred extra bucks a month, and be happy with that. Except that my web hosting clients were growing… and they wanted to pay less for consulting, but more for web hosting. The beginning of 2004 came around and I did my financial wrap-up for 2003, and here’s what I found:

Income from Simpli: $22,744.00
Income from consulting: $21,447.58

I was taken aback. Here I was spending 70-80% of my time on consulting and only a tiny fraction of my time on hosting, and hosting was making more money. Of course, hosting had more expenses. But I quickly realized that even with more expenses, hosting was the right way to go. Within two months, I had informed all of my consulting clients that my consulting business was shutting its doors and I was going to make Simpli into a pure hosting play. By the end of 2004, I was 100% web hosting, and the company has grown significantly from there, with our first 7-figure year expected in 2007, and 4 full-time employees as of this writing. We have never taken a dime of outside investment — i.e. we have to be profitable every month to stay in business. You’d be surprised how good you get at financial discipline when that’s the case. 😉

So what are my three rules for starting a business? They’re pretty simple, actually, but you’d be surprised how many business owners ignore them. They are:

1) Do something you love. I’ve seen so many start businesses that they didn’t know anything about because they felt like it could make a lot of money, or because they felt like it was the “closest thing” to what they loved, or even because it was just better than the job they had. But the thing to remember is that this is not just a business. This will be your life for a minimum of 2-3 years. Are you absolutely 100% sure that you can wake up in the morning and love what you do? Are you ready and willing to put your heart, soul, passion, love, and work work work work work into this business? If you can commit to this business idea like you’ve never committed to anything in your life, you’ll be fine.

I’ve often heard starting a business being compared to having a child. I commented on this to one friend who is a business owner. He said “Yes, it is similar. But children sleep.”

Businesses don’t sleep. Your clients can (and will, especially in the web hosting industry) call at 4AM. Your sleep will be really fragmented. Things will go wrong 24 hours a day. Sometimes you’ll feel like there is a never-ending shitstorm bearing down on you. And you gotta love that. Embrace it. And realize that it will work out, and someday you’ll be rewarded with multi-millions for all this crap you put up with. You must believe that the payoff is worth it.

Which brings me to point #2…

2) Make sure you have an exit strategy. What is your exit strategy? That was the problem I had with my PHP coding career, for instance. It had no exit strategy. It just had me, doing ever-more work for ever-less pay, as Indian outsourcing came into the picture. Yuck. That’s not the kind of life anyone wants to lead!

Build something that you can disentangle yourself from when the time is right. Don’t build something that you will be stuck with for the rest of your life. My father is 62 years old and still a practicing attorney. He says he’s going to work until the day he dies. He can’t retire because he and my mother require their large incomes (Mom runs a title company) to support their lifestyle. Do not put yourself in this position. Build something that you can eventually sell, or IPO with, or hire and train someone else to run. Build something that will be worth it. Remove yourself from the hours=wages shackles.

3) Love your clients. This is actually a bigger point than I can summarize quickly, but the main gist of it is “Don’t be afraid to shower your clients with love.” This is really, more than anything else, the secret to Simpli’s success. I go out there and I support my clients as much as I can. When things go wrong, I take responsibility and explain what we’re doing to correct the problem. When things go right, I get thank-you notes. I enforce with my staff (sometimes to the point where they say “I get it, I get it!”) communicate, communicate, communicate with clients. I am not afraid to say I love my clients. I am not afraid to show my passion for running my business and to let my clients know, over and over again, that I am fighting for them and their success with every hour of every day, and that my staff is there to back them up. Clients understand that things go wrong, and they’re willing to put up with an amazing amount of crap if they realize that you’re out there doing the absolute best you can, and they see that you’re putting everything you have into this, and it won’t happen again! Don’t be afraid to show the love. People notice, and they appreciate it much more than that stiff, formal crap you see from big companies. You are not a big company. You are you, and maybe a couple other people who work with you. Use that to its largest advantage.

I am a firm believer in people starting businesses. Most people don’t start because they are afraid. They see themselves failing and think they wouldn’t be able to handle that. But I’m different. I looked at it from the perspective of “What do I have to lose?” I was young, virtually debt-free, and I figured the absolute worst that would happen was that I’d move back to Indiana and live with my parents for a while. You should be different, too. Tell those people who bombard you with what-ifs to shove it; that you are doing what you love…so what if it fails? You’re going to do the absolute best you can. And if it fails, the great thing about living in America is that you can just go out and start another company. And maybe this one will stick. Look, no one comes out of the womb knowing what they want to do in life. Things change. People change. Do what you love, show the love, and have an exit strategy and you’ll do fine.