Early days in startup life feels like David Allen’s GTD on amphetamines.
Every day is a series of tasks that ends with the founders saying “we’ll deal with that later”.
But they never do.
There are 4 things that founders can do from the start that will save them hundreds of thousands of dollars — if the company makes it to its second birthday.
Pay to have up to date and sound employment contracts.
Startups hire and fire people all the time and the only thing between fair and ruin for it is the employment contract they have employees sign. If you don’t want to pay someone that you fired more than they deserve, be great at this part. It is worth it 10X over.
Keep your minute book current
The moment you add “inc” to your name is the moment that you’ve committed to keeping a log of your business transactions, loans, shareholder ledgers, board of directors, investors, records of board meetings and resolutions — everything.
Have a financial reporting process
Finances are loose during the early early days but this is one of the first things that should be professionalized. Finances are the foundation of a business — regardless of the stage. Best practices from the start are crucial down the road to file taxes, find investors and read the company’s future.
Sign a founders agreement
Founders should not just shake hands and carry on. Every one should sign an agreement as soon as possible and in that agreement there needs to be covenants to protect the business and the founders. Two HUGE covenants you need to have are an equity cliff (no shares issued if a co-founder leaves within the first year) and a buy/sell agreement (a way to establish how/if/when shares of a departing founder can/will be bought back by the company or the other founders).
There are MANY other things that will cost you money but these 4 are the ones that I’ve seen founders ignore at their peril over and over. In the companies that I’ve come into, my first 100 days are usually spent fixing these issues and spending dumb money to do so.
What you don’t pay for now, you will later and at a premium.