Well after being in business for 8 years we’ve decided to setup an operating agreement. It’s usually one of the first things you setup in a partnership / LLC; however the three of us decided to put this off to a later date in favor of using our funds to start the business. A few months turned into a few years and we finally just started the process.

For anyone who hasn’t setup an Operating Agreement before I suggest having some whiskey while working out the details. I say this because you have to work through all the ugly factors of what it looks like if you or your partners get disabled, dies, gets divorced, is forced to buy-out their share, or someone commits a moral turpitude (yeah, that’s a new word for me as well). Most importantly you’ll have to decide on the valuation of the company. Given that we never intend to sell the company or shares of it, this is one of those items we neglected to address for many years. In most cases valuation is arbitrary until you try selling the company; however it does play a part in the structure of the Operating Agreement. Knowing your valuation will help you plan for things like a forced buy-out or disability.

In our case we determined valuation by using a weighted average of 3 times our net profits for 2010 (current year), 2 times net profits in 2009 and the net profit of 2008 divided by 6. Then we applied an arbitrary factor to this number (for us it was 2) until we arrived at a number we liked and felt it would adjust nicely as we grew. As of October 2010 that value is $900k. This number is highly subjective to the owners’ goals for the company. For us, the valuation is low because we want to discourage the owners from selling their share to third parties. Additionally, if something happens to one of the three owners, Imulus will have to buy-out the other owner’s share, so in this scenario Imulus benefits from a low valuation. However, this doesn’t benefit the families of the deceased owner. Paying off the paltry sum of $300k to an ex-owner’s family likely isn’t going to replace the income of the deceased owner over a lifetime. That’s what life insurance is for.

It’s topics like this that you’ll have to address. Many of these topics are simply avoided because of the subject, yet if they are never discussed openly and addressed; then when something happens your company will be in a world of hurt. In hindsight, we’ve been driving over the speed limit without a seat-belt for the last 8 years – this was a reckless thing to do. If you are running a company without an Operating Agreement, I’d suggest looking into setting it up sooner rather then later. Start reading up on the topic over at NOLO and familiarizing yourself with how it all works.

Feel free to shoot any questions my way. I’d be glad to answer them based on my experience with the process.

Since November we’ve had well over 400 users interested in the Stacks beta program. Imulus isn’t exactly a well-known interactive agency, yet we’ve been able to generate a good amount of interest in little time and with little effort. The interest in Stacks is primarily generated from our success with our Support Details product.

Support Detail is a free web-tech support application that we launched in April of 2009. It was a tool that sat on our back-burner for over 6 years, but it took less then 1 week to develop. We launched it to solve a recurring problem that we had with clients not technically familiar enough to give us the browser’s technical specifications. Within weeks of it’s launch, Support Details was featured in LifeHacker, SitePoint, StumbleUpon and MaximumPC. That early success drove visitor count up to 40k per month. With that much traffic coming to the site we decided to advertise our own products using Support Details as the advertising outlet. Our logic, if you like what we’ve done with Support Details, then maybe you’ll like our other products. Hopefully Stacks is equally as exciting as Support Details. We believe it is and we’ll work hard keep it useful without becoming cumbersome.

We’ve snowballed the success of one product into another. This method can be seen all over the web. Most notably by 37Signals. They’ve managed to build BaseCamp, snowball success into Ruby on Rails, then to the SVN Blog, then to the Job Board, etc… Now they have an entire suite of products, most of which are very successful. They are selling by snowballing their success from product to product. This creates a community of supporters and users that grow with you over time.

I don’t think this methodology is difficult to replicate. Focus on solving a problem within your industry. It doesn’t need to be sexy, or feature rich. Stop yourself the next time you get frustrated with an aspect of your daily routine. Think about an easy way to solve that problem then execute on it. Just don’t wait 6 years to pull the trigger.

Process is like most things in life, it needs balance. The hard part is determining where the right balance is for a company.

Companies that focus too heavily on process can slip into the all-to-common roll of being a workhorse. Producing medium quality work that lacks feel and creativity. Yet, companies that can’t reign in certain aspects of process tend to lose money and long-term durability. The key lies in finding a medium.

Implementation of a strict process can help companies rebound in times when individuals aren’t present. Yet, companies must be careful. The ability to swap individuals in and out has a cost. There’s a reason small businesses sometimes change the game all together and not just the rules. Small companies thrive on being nimble and innovative. These two things are the result of talented individuals working together as a family. If you remove this aspect from a company, over time it will bloat, lose drive, and eventually quality will diminish.

Case in point, rather than: check your approach, verify other team members understand and agree, confirm the customer is on board, document it, and then start. It’s better to just do it. If the result is good: add it to your toolshed, document it, and teach others. If not, eat crow, fix it, and move on. My feeling is most of the time this gamble pays off. Especially if your people are high caliber and your customer buys into the strategy.

However, for small companies it’s a facade to pretend that you can replace a family member and keep moving forward like nothing happened. A company, especially one that strives to break barriers, will always be hurt by the loss of a key individual. There is no way around this. The goal of a good process shouldn’t be to avoid this all together, but rather to mitigate its damage. Employee happiness, company profit, high quality work, and long-term sustainability should be enhanced by process. Not stifled. This… is not easy.

Best of luck to all companies (including us) who are trying to combat this challenge

Our “Process” is under attack; by us.

Recently, if you’ve bugged our office you’d be hearing the word “Process” tossed around with great frequency. This sounds ironic coming from a company which disdains corporate red-tape and culture. Yet I feel that Process has gotten a bad rap over the years. It’s been associated with words like ridged, out-dated, creativity-killer, soul-crusher… you get the point. In fact, I believe the opposite is true.

A great process is like having a common language between your entire team. Anyone new, coming into that team should be able to learn the language and immediately contribute. Similar to a language; processes need to be malleable and grow organically over the years. We’ve looked at ourselves in the mirror and determined that much of our success is dependent upon our chemistry and culture. While these things work well at first, they don’t allow your company to grow. They really fail once someone leaves either on vacation or permanently. Events like that will clearly cause havoc in a company which is glued together by chemistry.

Documenting Process allows us to quickly pick-up where another has left off. When a failure happens along the course of a project, it is the process that can be refined. Teams which clearly understand and execute an effective process will spend less time thinking about how to do something and more time can be dedicated to execution and creativity.

As an entrepreneur there is no boss to tell me what I’m doing wrong. Instead, I try to be hyper-vigilant on assessing my performance, skills and the myriad of daily communications. I can’t be truly confident in my abilities without being self-critical. It serves no one to hide faults and weaknesses behind a false appearance.

Here is my own personal list (made public) to help myself gain a perspective on a situation and how I can resolve it. This time it is “Why I fail to execute.”

Why?

• I don’t plan out enough.
• I’m always rushing myself, therefore things get missed and others pay the price.
• I put too many little things on my plate which should be delegated out.
• I’m not giving others enough information and training to adequately pick up some of my workload.
• When I do assign myself work, it’s too easy to push things off into the future.

What are my rewards for “not executing”?
It’s helpful to dig deep into the hidden reasons that a negative feature or characteristic continues despite a desire to change.

• Delaying work load if I don’t feel like doing it.
• Delayed responsibility.
• It allows me to choose what things I focus on thereby giving me some sort of twisted control.
• It creates a perception that I’m too busy, maybe deep down I want that perception, but busy doesn’t equal effective.

What does it cost me?

• Time
• Energy
• Lack of achieving goals.
• Stress & frustration.
• Lack of leadership.
• Reduced depth of relationships
• Loss of money & failure to capitalize on opportunities
• Self-confidence

How can I change this?

• Wake up each morning and plan the day; look at tomorrow; assess the next 5 days.
• Make time to focus on creativity during the week.
• Prioritize tasks which can be delegated and get back to others first thing in the morning so they aren’t left waiting for a response.
• Set aside a time chunk each day for tasks which only I can do; and make time to document, train and delegate items to others.
• Before pushing off a task ask myself “what is it costing me to delay this?”
• Minimize distractions and make time for brainless activities.

There you go. I hope this helps other entrepreneurs better understand themselves.