It’s business time! Choose a holding structure, write a short statute and three other business tips for your startup – delivered by startup accountant Victor Fasahati.
The stats are unequivocal: Nine out of ten startups fail within their first five years. Victor Fasahati has experienced this depressing reality first-hand. As a startup entrepreneur himself and as CEO in Dansk Selskab, an accounting company that helps young businesses to establish themselves in the so-called market; A dangerous jungle with dense nets of bureaucracy and startup-eating predators lurking behind every corner.
While such small chances of success might scare most sane people away from pursuing their entrepreneurial reveries, Victor Fasahati has embarked on a mission to change the discouraging statistics in favour of the startups:
“Traditional accountants don’t believe in the dreams of the entrepreneur. They know that most companies won’t survive the first five years, so they want to squeeze the margin dry while they have the chance. This is the problem I have set out to break with,” says Fasahati who considers himself a more proactive accountant driven by a passion for the community.
“An accountant should always look for ways to optimize the books for his customers. He should be able to identify connections and be predictive. A proactive accountant will say: Don’t forget to… instead of: Did you remember to…?” Fasahati clarifies.
Dansk Selskab uses a software that makes it easier and therefore cheaper to found companies. They take care of all the dull paperwork, advice novices to choose the right business model, and of course, help young companies to orderly books. In the spirit of startup-guidance, we asked Fasahati to take a minute off and provide us with five useable tips for all of the daredevils out there.
Here is what he had for us!
1. Launch crap – but launch!
Obviously, you got to have a good idea and a general overview of the market. Will your product stand out? Is it innovative compared to other solutions? Do you have competitors? If so, how will your startup beat them? That said, your product doesn’t have to be perfectly polished when you launch it. Get it out there, check out if people are even interested. I’ve seen so many entrepreneurs spending way too much money on domains, logos and fancy websites, just to find out that there is no market for their product. My first advice is to launch the crap and then afterwards ask for forgiveness if something goes wrong.
2. At least get your hands on 50.000 DKK
You don’t need to be a millionaire to start a company, but you have to make sure that you have some capital before you begin. My estimate is that a startup needs at least 50.000 DKK. It might be a little overkill if you just run a one-man consultancy company, but there will, sooner or later, be unforeseen bills: insurances, expenses for a webshop, legal help etc. So get your hands on some backup cash, if you want to make sure your otherwise promising business won’t fail because of some unexpected expense.
3. Short status, long shareholders agreement
Statutes are obligatory but they also public, which means that all your potential competitors are allowed to read them. To avoid exposing yourself as a startup, make sure that your statutes are as thin and basic as possible. Write a long shareholders agreement or owner agreement instead. On the other hand, there is so much stuff you need to specify when establishing a company, so shareholder agreements should be as detailed as possible, especially if you have a partnership model. What happens in one of you needs a long sick leave? What if one of you want to quit? Can you then sell your share to anyone? Will partners have a preferential option to buy? Are instalment agreements possible or should you be able to pay upfront? Think all scenarios through, even when it seems overkill.
4. Choose a holding structure
I will recommend a holding structure to 80 % of all companies, especially if you eventually plan to invest some of your profit. You will have a few expenses, but it will be the best solution in case your startup become successful. If you wait until you get success, you will have to buy the value of your company for taxed money – it’s a mess! Create a holding company from day one, and you will be able to buy in for 1 kroner. Wait and it might be too late. You don’t want to be a victim of your own success, right?
5. Find a mentor
Find someone who is really good at the thing you want to do. Look for an experienced mentor who is willing to help you and who can guide you when in doubt. Or, maybe create an advisory board. It doesn’t have to be a paid directory board or something too formal, but I definitely advise everyone to find an advisor.
Good luck out there. May we all become the five successful percent!