Internet Tech Boston

This month’s guest post comes to us from Matt Wiseley, founder and Chief Architect at EditMe.com, a hosted wiki with “a powerful JavaScript API that provides complete control over a highly configurable content management solution.” Based in Maynard, MA, EditMe was founded in 2002 under a firm set of guiding goals and a disciplined approach that is uncommon in the frenetic Web 2.0 Product Development industry. To that end, I asked Matt to share his thoughts on how he made the move from part of the rat-race to stable startup and small company.

Chicken Entrepreneurship is a term used to describe a growing class of entrepreneurs who start a business while maintaining their full time job. Internet businesses that don’t require full-time staff (at least in the beginning) have made this a popular option among entrepreneurs.

Perhaps you’re motivated by the allure of riches. In his blog, The Simple Dollar, Trent Hamm discusses how Chicken Entrepreneurship can lead to financial independence.   Maybe you just want the independence and flexibility running your own business can provide. Or maybe you just want to build something from scratch with your own brainpower and two hands. Any way you read it, this strategy for starting a business has some real benefits. I should know: I started my company while working fulltime. I’ve since left that job and my business is flourishing. Looking back, I wouldn’t do it any differently.

There are three huge benefits to starting out this way:

• You don’t need a salary. You can use the income from your full-time salary to support yourself while the business is ramping up. This would otherwise pose a significant capital expense to the new company.
• You can invest your disposable income. You can also use some of that income to fund the start-up yourself, perhaps avoiding taking on debt or the need for outside investors. Remember, if you start a company with somebody else’s money, it’s not really your company.
• Less risk to your finances and career. Finally, you can test the waters with a minimal monetary investment and back out with no harm done if it doesn’t take off.

What kind of businesses are best started this way? Look for these traits:

• Recurring revenue. Look for a business model that provides steady recurring revenue. You won’t have time to work for every penny the company earns. The more money the company can earn on its own, the less you’ll have to be there.
• Headless. Your business can’t require your presence during the day – you won’t be there.
• Homemade. Look for a product or service you can build/develop yourself, or one you can easily afford to outsource. If your company is within your area of expertise (it should be), nobody can implement your idea as well as you can at this defining stage.
• Low capital requirement. The company shouldn’t require a large capital investment, such as buying a fleet of delivery trucks, unless you’ve got the dough on hand and won’t miss it.
• Monthly expenses. Look for expenses that can be paid monthly rather than in large sums up front. Use services aimed at small businesses rather than hiring staff and buying equipment. This will allow you to use your disposable income to pay the company’s expenses with as little pain as possible.
• Keep the wind at your back. Find a business that takes advantage of market conditions. This is true for any business, but the more your company can benefit from external conditions the less up-hill pushing you’ll have to do. For example, I started a wiki hosting business just before the man-on-the-street was starting to know what Wikipedia was.

Once you’ve got an idea, you need to do a self-check to determine whether this is going to work for you at this time in your life and career.

• Spare time. You will need a lot of spare time in the evenings and on weekends. Without it, your business will be starved for attention. If you’ve got young children or are otherwise time-committed, this is not for you.
• Disposable income. Do you have significant disposable income? If you’re living paycheck to paycheck, you won’t have much to put into the company. Cut your expenses down to the bare minimum during this ramp-up time (between 1 and 3 years) to maximize your non-debt investment capability.
• Leveraged skill. You will need a skill that can be leveraged by the company. For me, it was software development. Your time will be the most valuable (and free) asset the fledgling company has, so make sure it’s put to good use.
• Flexible job. You should work things so that you’re not interrupted at all by your business during the work-day, but some flexibility in your day job will come in handy. If you have a pushy over-seer of a boss, consider moving to something a little more low-key during this process.

Finally, you’ll likely need to pick up some new skills and do some homework. Assuming you’re the only real employee, you’re going to have to wear all the hats. Don’t assume you can figure these out as you go along. Find good books on each subject you don’t consider yourself an expert in and read them before starting out.

• Marketing. Your company will need to make every penny of its marketing budget count. You can avoid costly mistakes by doing your homework before spending any money. Trust me: marketing is harder than you think.
• Insurance. Research your need for business liability insurance. If you don’t do this properly, you can be sued by customers and lose your personal assets.
• Business entity. Research legal business structures and pick one. Doing so can add to your protection against lawsuits, and can also provide valuable financial and tax benefits.
• Delegate. Learn to delegate and outsource. For example, don’t design the marketing materials and web site if you’re not a designer. Learn to use tools like Elance to find affordable short-term staffing.
• Employee agreement. Research the implications of any employee agreement you have with your current employer. Consult an attorney to make sure there are no conflicts and that your employer can’t swoop in and “own” your company.

I spent years slowly growing my business, rather than BAM! New business. This organic, gradual growth enabled a lot of practice and trial and error. The only deadlines and revenue goals were my own, and not a lot was riding on them. To me, it was the only way to go. It was smart, not chicken. With no debt and essentially no risk at all, I got to where I wanted to be: owning a company that I enjoy working for. I’ve never regretted it and am currently incubating another idea to build on the side while running my business. So, go ahead, be chicken!