Ask Permission not Forgiveness

How to Build a Strong and Scalable Business

castle .jpeg

We live in the start-up age, where the prevailing maxim is that rules are made to be broken, limits are meant to be shattered, and technology can change the world. The phrase, "ask forgiveness not permission" is basically corporate policy (it actually is, for Angellist). If you aren't breaking boundaries, you're not doing it right. 

The U.S. has been breaking rules for a long time. America exists because it broke the big British rule (ha ha) and led a successful revolution. American business culture thrives on innovation, which means that we often ignore the old way or build off of it, in order to make a new better way. Creativity is a birthing of new ideas, which often supplant and improve upon the old. But I'm not going to talk about innovation or creativity here. I'm just going to talk about the very basic foundations of building a business. 

A lot of businesses start with one inspired person and an idea. That idea could be really good. People might want to invest in that idea, and someone might want to buy the idea. The idea could shape a community. It could create jobs for hundreds of people. That idea could change the whole world. But no matter what, that idea, if defined as a business, will have to follow certain rules and regs. 

Building a business is boring as hell. There are federal regulations and state regulations on basically everything. You'll have to pay a bunch of money to incorporate. You'll have to find a name no one else has. Every time you buy something for the business you'll have to write it down. When you hire an employee, you'll have to fill out paperwork. If all this sounds exciting to you, you might be an accountant. My point is there are minute and seemingly endless steps to becoming a legit business, and those steps are worth taking methodically and one at a time. 

First, you'll to create a business plan that includes financials. You'll need to do your market research, regardless if you think your idea is going to make a $100 million and change the whole world and definitely no one has already thought of it. You'll need to create budgets and projections. If you can afford it, you can hire a CPA to help you out. You'll need to set goals and create a vision and values. You'll have to learn about sales and marketing. These things are all necessary, no matter how amazing your idea is. Without them, your idea is just an idea. 

Many people start businesses because they want to do something they love, such as roasting coffee or making kombucha. If this is you, please re-read the last two paragraphs. A shockingly common misconception people have about starting a business is that they will get to do the thing they love, all of the time. This is utterly not true. You will be doing the thing you love part of the time, and you will also be doing everything else: office management, business development, customer service, marketing, visioning, accounting, and so many other roles that you might have no idea how to do.

Starting and running a business inevitably means climbing up a mountain of rules, paperwork, expenditures, and obstacles. Taxes, insurance, contracts, lawyers, accountants, employee handbooks...the pile is limitless, and it only gets bigger as you grow. 

Even if you are so good at doing the thing you love that everyone flocks to your store or your website and buys all of your inventory, you will have to wear the many hats of a business owner. Ignoring the boring stuff will get you into hot (like scalding hot, not hot tub hot) water.

Back to asking permission. Asking permission is sometimes not so clear cut. Sometimes you have to go online and research what you need to do. Sometimes you might need to hire a lawyer to help you out. Ask everyone you know who has a similar business in your city or state. Find out what the rules are. Find out what other businesses have done. Learn from their successes and mistakes. If you don't do this, it is almost impossible that something will not go wrong.

Something going wrong could be a small thing. Last week I got my haircut from a stylist who works out of her home. Right when she first started, a local barber reported her, and she had to go to a hearing and pay a $40 fee to operate out of a residence. That's one example of when asking forgiveness comes at negligible cost, as $40 is less than the price of a single haircut.

More likely you could face lawsuits, exorbitant fines, and damage trust among stakeholders. Take the NYC soul food restaurant chain Manna, which had to pay $1 million in back wages to under-paid workers in 2014. They weren't paying overtime to their employees. I don't think that Manna underpaid their workers on purpose. I think they probably just weren't aware of the Fair Labor Standards Act (FLSA) and how it applied to their business. Not knowing, and not taking steps to know the laws, got them into huge trouble. 

Fines, lawsuits, audits, and bankruptcy are hard and clear repercussions of not knowing or following the rules. You can totally try to ask forgiveness, but chances are you will still have to pay.

If you start out in business without paying attention to basic business rules and guidelines, you will create an unstable foundation that will not support growth. You will be constantly backpedaling to fix your mistakes, and patch over neglected areas. There's no one formula for growth, but small business experts, such as Michael Gerber of E-Myth fame, point to the clear success of huge franchise model businesses. One thing they have in common (besides being ubiquitous and often serving up non-nutritious foods) is before the growth phase, their founders envisioned and planned for their idea to become scalable, or huge and successful.

Franchises create effective systems that can be replicated in order for maximum efficiency, clear feedback, and growth. These businesses write everything down, create concrete business plans and budgets, formulate projections, do constant market research, prioritize strategy, and set clear goals. They have a strong and clear mission, vision, and set of values, which they make sure to share will all employees and stakeholders. They work to create a solid brand that makes sense to people. They strive for consistency and familiarity in their products and services.

I'm not saying McDonalds is a perfect business that we should all emulate. But the franchises we all know (and love/hate) have a formula, and it works. Plus, nowadays there are franchises that are actually pretty inspiring and serve out nourishing food, fitness, and even wellness. Their effective business models are helping people to appreciate salad, exercise, and massage.

Don't want to scale? Gerber would say that even if you never plan to open another store, or even to scale your business, thinking like a franchise will strengthen your business model anyway. The franchise principle applies even to web and cloud-based start-ups, where there might not be a material product or brick-and-morter space. Creating systems for a strong foundation and steady growth will help any business succeed long-term. 

Asking forgiveness is a short term strategy. It allows us to take shortcuts in order to meet immediate needs. My perspective is that if you want to start a business, you must think long-term from the beginning. If you plan to break a rule, at least do it intentionally. By all means go for it, as long are you've got a clear idea of potential outcomes. The benefits must outweigh the risks (more on how this way of thinking has destroyed our environment and silenced local communities in a future post). There's no guarantee that your amazing idea will survive. 80% of new businesses fail within 18 months. The idea alone cannot sustain the business. 

"Entrepreneur" is a romantic-sounding word. It calls to my mind a well-dressed, clean-cut European man in a well-fitted suit. The word "entrepreneur" comes from Latin--entres (to swim out) and prendes (to grasp, understand, or capture). I see that well-dressed man jumping into the ocean, into a completely new environment where there is no land to stand on, seeking an island far in the distance. There's quite a long way from the shore to the island, and the water is grey and choppy. It wouldn't be that hard to drown.

Anyone willing to jump into the ocean in a suit should probably equip themselves with at least a few tools: a boat perhaps? Some supplies, maybe food, water, rope, flares, a compass? A few crew mates to help row (I'd recommend a woman and some folks who come from diverse backgrounds to provide an inclusive perspective)? Maybe a map? With some good planning and all of these tools, our excitable entrepreneur has a much better chance of reaching the island, and setting up shop.

Sarah BisceglieComment