Why I ignore the organizational details early on in my startups.

An iPhone with a dead battery is worthless. I have three of them sitting in a drawer at home. I don’t even bother taking them out and trying to sell them because they are of little value.

A startup organization (e.g. LLC, S-Corp) in the earliest stages of a venture is worthless too. By itself, it doesn’t add any value. Without a new venture opportunity and a working model that generates revenue, there is no point in setting it up.

I have plenty of “startups” organized and sitting in a drawer of paper (I use the phones to hold them down). I filed paperwork and tax forms but never made a dime because there ended up not being a good opportunity or model for the business.

So, I shut it down before it did anything, and I ended up doing a bunch of administrative tasks I didn’t want to do.

The problem is that many entrepreneurs spend too much time trying to get their organization in place at the very beginning of their new venture. Even before they have anything worth organizing around. During this process, they sacrifice what is most important now for some potential benefits in the future — benefits only realized if the new venture opportunity and model actually work.

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A startup consists of two fundamental components: an entrepreneurial opportunity and an organizational structure. Each of these components play a critical role in the outcomes of a new venture. However, their importance in the outcomes is not concurrent in the early stages of the venture. In fact, entrepreneurs who spend their limited time and resources worrying about organizational structures sacrifice these critical resources in the development of their business opportunity. While you can get by for a time with a limited organizational structure, you will not survive without a solid business opportunity. Consequently, entrepreneurs should learn what things they can do to avoid spending significant time and resources on organizational structures during the early stages of their new venture.

Here a couple of my quick thoughts.

Do what is quickest, easiest, and cheapest early on in your startup. It will give you more time to get your venture running and making money. Then, you will have plenty of money to pay others to figure out the organizational details. This, I suggest, is the better way.

Researcher | Entrepreneur | Mentor | Investor | Director CSUSM Innovation Center

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