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The other day, a friend of mine divulged to me that, with a few acquaintances, he was going to do a startup. The allure of working for yourself and the prospects of success were in his eyes. So I sat down with him and gave him some advice (that I have come by from my own scars of doing startups).

Don’t build what you know how to build. Instead, build what you can sell. The acid test for a startup is whether it can sell. If it can’t or won’t sell, then it is not worth doing. This should be the very question asked and should be the primary focus every waking day in the life of the startup. It is amazing how many startups don’t even consider this until they have built a product.

Realize that 95% of the startup resources will go to marketing and sales. Many startups think that 95% of the effort and resources of the startup go to the development of a product. These startups soon find themselves with a product, no customers, and no way to find customers.

Intellectual property is the backbone of the startup. In this day and age, there are monolithic companies with huge amounts of resources. It is very easy for these companies to copy or duplicate products and innovation once the marketplace has been developed and proven. The truth is that the only chance the small company stands is to develop intellectual property that is forbidden to the large companies. This usually means patents. Patents are expensive and cumbersome. There is no such thing as an easy patent to write. If you have a really good idea and an innovation that is going to change the world, there are a million people waiting for you to have success so that they can rip you off. Legally rip you off. So, welcome the newest member of the development team – the lawyer. This is a painful lesson for the entrepreneur.

Get rid of unproductive people quickly. It is normal for several people to get together and to start to collaborate in order to build the startup. It is not unusual for these people to be casual acquaintances. But when thrown together, it comes out that one or more of these people are unwilling or unable to pull their fair share of the workload. The initial reaction is to let time pass to see if the situation will work itself out. And perhaps the situation will work itself out over time. But more often, the situation grows worse. When it is recognized that someone is not pulling their share of the load, get rid of him or her. Immediately if possible.

If one or more of the founders are working part time or even full time while doing the startup, make absolutely sure that the work for the startup does not overlap with the job of the founder. Most companies have employment agreements that cover inventions and innovations. You do not want to wake up one morning to find out that some or all of the startup’s work belongs to someone else. In fact, you want to avoid a lawsuit even if you are right and the employer is wrong. If you get a lawsuit here, it is almost a sure bet that the employer has massively more resources for litigation than you have. On this issue, you want to bend over backward to make sure there is not the slightest hint of overlap or conflict of interest.

Plan carefully for not having income. Most startups – especially those that are building products – have a long way to go before there is any income. It is best that a person and his/her family can go six months with no income. And then, there is the issue of possible startup failure. You need to have another six months’ worth of income in preparation for reentering the work force.

Take a good look around to see if there are any competing products before any development starts. DO NOT wear rose-colored glasses. If competition exists, recognize it as such. You have to have a significant advantage to compete in a marketplace that has already been established.

If there is no competition, you are going to have to create a marketplace. Everyone underestimates the resources required to establish a marketplace. Establishing a marketplace requires education, development of the value proposition, advertising, marketplace awareness, pricing, support – and all of this before the first sale is made. It is tempting to look at an innovation and see no competition. What isn’t so tempting is an awareness of the work that is required to actually market and sell the product in the absence of an established pattern of buying.

Be aware that if you really do have a good idea, competition is lurking behind every shadow and every bush. If you really do have an innovation, you are going to be amazed at how fast competition appears – seemingly out of thin air, from places you never expected.

Money changes everything. It is amazing how many people can work together when there is a struggle. But at the first sign of money, dynamics change and change dramatically. And for people who have never experienced this phenomenon, it really takes them by surprise. With money, power and domain start to be settled, and a whole different side of people suddenly surfaces.

Avoid venture capitalists at all costs. Venture capitalists are greedy. Would you sit down and play poker with a professional cheater? Of course you wouldn’t. So why would you take money from a venture capitalist? In almost all cases, it is better to grow slow and incrementally than it is to allow a venture capitalist to come in and take over your company. And make no mistake about it, it is the goal of the venture capitalist to remove you from your venture, assuming that your venture is successful.

Be flexible. The one real advantage a small venture has over larger ones is flexibility. Use agility ruthlessly. Be opportunistic.

Build a business plan but don’t put too much faith in a plan. Plans change. And investors always think they can build a business plan better than you can. Your job is to build products, innovate and make money. Your job is not to build a beautiful business plan.

Be wary of the investor that points out what you don’t have as a ploy to demean you and your product’s value. As a startup, by definition, you don’t have everything you need. You always need a marketing manager. You always need more referenceable customers. Your product always needs more features. You always need more revenue. The job of the investor is to point out what your deficiencies are and to convince you of your unworthiness for investment. This all has the effect of lowering the price of your venture to your disadvantage and to the investors’ advantage.

Beware of biting off too big a bite of the apple. Bite off only what you can chew, and go at a pace that is sensible. The marketplace you are after – if you have a really good idea – is not going away.

These are some words of advice for the ambitious young entrepreneurs out there.

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