What to Consider When Starting a Services Company: Page 2 of 3

Intelligent Product Solutions CEO and co-founder Mitch Maiman shares his experences over the last decade in starting and growing his start-up.

clients. In the case, of IPS, we knew it was hard to build as diverse and highly experienced a team as we ended up building and we knew (from my days of using professional services firms) there was a dearth of options with the full suite of competencies of IPS. I also knew that “If we build it, they will come” was a true possibility.

When starting any company, founders need to do a risk/reward analysis. While this need not be highly formalized, it is necessary. We understood the risk (i.e. my partner and I along with “family and friends network” could lose money) but considered the risk to be moderate. We knew the clients who would help us kickstart the company (to our friends out there, you know who you are and THANKS!). We also knew that we had the relationships we needed to rapidly build the depth and diversity of the team (in a services company, the team staff-hours are the “product”). We further realized that, while not a path to fame and vast riches, we could generate a return on our investment, make a good living and, as importantly for us, have all kinds of interesting, satisfying work. Lastly, for good, bad or other, we don’t have any other bosses to whom we need to report or satisfy (other than our clients, of course!).

What have we learned?

There are many lessons learned, and we continue to learn every day. Here are a few:

1. It takes a lot more capital than you think. Anyone who thinks they don’t need a lot of ready cash behind their business is sadly mistaken

2. Related to #1, it takes a lot longer to get paid than you can imagine. You want those nice, big Tier #1 clients? Great. So does everyone else. Realize that payment terms can be 60 days or longer (sometimes much longer). In a services business, it means you pay a staff member this week and you might invoice two weeks later. Then it takes two weeks for the manager at your client to approve payment. Then you wait 60 days for the client to pay (who sometimes will only start the payment process in 60 days). Then, be prepared to wait several days for the check to clear. Engineers and other skilled workers are expensive. Better have a lot of money in the bank or a hefty line of credit behind you.

3. Not all clients are ethical. In 30+ years working inside big companies, with very rare exceptions, if a vendor did the work, they will eventually get paid. However, there are a lot of unethical small/mid-size businesses out there who, as a matter of practice, will try to stiff their vendors/suppliers out of payment. Be prepared to spend a lot more time with attorneys than you might have imagined.

4. Landing new clients takes a lot more time than you think. Furthermore, the bigger they are, the longer it takes. We recently did work for awell-known cellular service company. We spent almost two years trying

Add new comment

By submitting this form, you accept the Mollom privacy policy.