Wow. It’s scary to me. There’s some really bad advice available on blogs. I just saw one about bootstrapping suggesting that bootstrappers starting new businesses are better off without the business professionals, meaning lawyers, accountants, and consultants. That’s the kind of advice that people throw around all too easily. It might be valid for some very small startups, and really dumb for others, small or not. A lot depends on how many people are involved, how much money, and how much work. Furthermore, with professional services, timing is also important. People are much more likely to need attorneys than accountants at the beginning, and much more likely to need accountants at tax time as they move forward. Consultants are special cases, to be used according to specific needs.

Furthermore, it’s all lumped together wrong, as if all these professionals are the same thing. They aren’t. You have different needs for different businesses, and at different times, but here is a simple set of five mistakes to avoid.

  1. Don’t underestimate the value of legal advice. As soon as you have two or more people involved in a startup, talking to an attorney is a good idea. Ownership is not trivial. You need to figure out how many shares each of you get, and why. There are no blanket rules for whether you want a corporation or LLC, and partnerships are appropriate in some cases, and simple fictitious business names are sometimes all that’s needed. You need to think through tax implications, future growth implications, what happens if you break up, and you need to do it early, before there’s real money at stake. Two or three hours of a good attorney’s time, especially at the very early startup phase, can save you lots of headache later.I do know you can get this done via software packages and company generators who cost a lot less than an hour of attorney time. Some of these can save you money if you do some of the work yourself, but be smart, have an attorney guide you through it first. Know what the tradeoffs are.
  2. Don’t do your own taxes. You don’t need a CPA to start your business, but you do need to keep very good records of all money transactions (as I suggested in my post about accounting software earlier this week) and you need to get professional tax help at tax time. Taxes are complicated and tax mistakes are way more expensive than tax advice from a good accountant. Work with a CPA at least once a year.
  3. Don’t give professionals (lawyers, accountants, consultants) ownership in your business. If you can’t pay for their services, then revise your startup expenses, review where you’re getting financing, if anywhere, and find a budget for consulting or do without.
  4. Don’t confuse consultants with coaches.Good coaches help you get things done, they share advice and experience and know-how but they don’t do it for you. Consultants do the work and deliver you the results. Few startups and even fewer bootstrapped startups can afford to spend money on consultants.
  5. Never hire a professional without first talking to two or three of his or her current or past clients. You need to have professionals you can trust and work with on occasion for a long time. Definitely check references. Just being a member of the bar or having the CPA certification doesn’t mean these are the people you want to trust with your business. With consultants and coaches, it’s even more important, because there isn’t a professional certification you can work with.
Tim BerryTim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Follow him on Twitter @Timberry.