In this article we share with you the minimum you need to know and do, in order to create a business that will last and has the potential to grow.

In our meetings with UTP students, on at least three occasions, we have been asked for advice on starting a business.

One student in particular wrote to us: ““I am a first-year student… I was very interested in the topic of entrepreneurship and forming my own company, I would like to know if you can give me some kind of documentation, information or even some advice on the topic.”. This was our response:

Truth be told, we have not seen any really good documentation on how to open a company in Panama. What there is on the Internet are quite a few articles, on various topics of entrepreneurship in general. We don’t know how much experience you have on the subject, but here is the minimum you need to know and do, in order to create a company that will last and has the potential to grow.

At the end we put a couple of books that have helped us grow as entrepreneurs, maybe they will help you too. As you know, running your own business requires working in several areas. Here we put them in almost the order in which you have to do them:

1. The Product to be Sold

The Company Exists When You Have a Product.

The company does not exist until you have something to sell. So, what are you going to sell in your company? If you don’t have something that someone is willing to buy, then don’t waste time doing business yet. It is very important that you have a product ready to generate money.

In the case of EtyaLab, the main product we offer is software development, and both Susana and I were ready to program in almost any language when we made our first sale.

First have a defined product, and look for your first customer. Once you have that first person who will pay for your product, then start running a business as a company.

Validate your Product and Plan your Budget.

If instead, you are thinking about a product that is sold online, such as a mobile app or a website, then the approach is very different. You have to validate that people are actually willing to buy your product. Either through surveys or by reading about success stories in other parts of the world.

These are the most difficult types of business to do because they may fail and you may lose all the time and money invested. To minimize the risk of loss, we recommend you apply to Senacyt’s Seed Capital programs or the scaling up program: http://www.senacyt.gob.pa/convocatorias/

Currently, the call for seed capital is in process, so you can not apply right now, but you can find out when they open it again.

In the case of EtyaLab, we saved for a long time before starting our entrepreneurial life. So we took the risk of investing money out of our own pocket to start the company. Of course, this means that we worked for a couple of years to have enough money saved for this moment.

2. Sales

The Product Doesn’t Sell Itself.

No one is going to buy something from you if they don’t know you are selling it. The product doesn’t sell itself Someone has to be practically two or three times a week contacting potential customers, making quotations, making marketing presentations, meeting with potential buyers, etc.

How to Get Customers?

In the case of EtyaLab, most of our clients we have gotten by going to technology events in Panama and talking to as many people as possible. We have even made alliances with certain companies/foundations that we practically work for free, but in exchange they let us talk to their audience. This gives us a lot of exposure and makes more people become potential clients.

The second biggest source of clients are contacts. Your family, friends, people you meet at events, etc., know someone who knows someone who needs your product. Ask to be introduced to them.

3. Legalization of the Company

Leave it for later.

This part seems to be the first one to be done, but believe us it is better to do it after you have a customer who is about to buy your product.

The reality is that when you start your business, you don’t know how long it will take to have your first customer You may be very optimistic and think it will only take a month. But what if it takes 6 months or a year?

Business legalization is not something to be taken lightly. It is recommended to legalize a company as a corporation and then take out the notice of operation If you legalize your company as a corporation, this means that you will be forced to pay the following:

• $300 annual fee for being an S.A. only.
• About $150-$250 annually to pay a resident lawyer. This is a requirement of the state of Panama, and even though the lawyer does nothing for the company, just for the fact of putting his name as the resident lawyer of the company, you are charged an annuity.
• Annual Income Tax Return.
• Municipal Taxes (About $120 per year).

Do you want to be paying all those annual fees if you haven’t been able to make any sales? Of course, you don’t. That’s why we recommend waiting until you have a customer who is about to pay for the product.

An Anecdote from Someone Who Didn’t Leave It for Later.

. In my case, before starting EtyaLab, I did another business called Kinblade It was me with 5 other partners. We were all very excited, we legalized the company as a Natural Person (to save the costs of the S.A.).

We bought a computer for the company, we bought the domain kinblade.com, we took out the operation notice to start operations legally, etc.

We were more than ready to start! There was only one small problem: the product to sell was in our head. We didn’t have anything done. As time went by, I realized that the team was not very committed to the project and they started working very slowly.

So much so that people were looking for outside jobs while they were still working on Kinblade. After a few months, I realized that it wasn’t going anywhere and I cancelled the notice of operation. Even so, later I got a call from the municipality because I had to pay a couple of things for the paperwork I had done. Was it worth the investment of time and money to create Kinblade? No.

The one valuable thing I learned from Kinblade is not to rush into starting a company if I don’t even have a product to sell. So, I hope that anecdote teaches you the same thing.

4. Accounting

Once you make your first sale, the month-to-month bookkeeping mess begins. I repeat: month to month. This means that every month someone has to stop what he/she is doing to take all the sales invoices to the accountant and to declare the income.

The case of accounting is a rather delicate subject. Many people say that if you invoice less than $36,000 a year then you don’t need to use a fiscal printer, and you can use normal invoices that you can send to a printer. But we saw that if we didn’t use the fiscal printer, we had to do another paperwork with the DGI so that they would let you invoice without the fiscal printer. We felt that this extra work was not worth it, so we decided to start with the fiscal printer from the beginning. This means that someone has to learn how to use the fiscal printer and create invoices with the printer every time you are going to sell something to a customer.

All of these things are good things to discuss with an accountant. Therefore, as soon as you are going to have your first sale, you should start looking for the accountant of your company. That person will be with you doing the income tax return month by month. And that person will also charge you a fee, which can range from $150 to $500 per year, if you are just starting out.

5. Contracts

Once you make the sale, what kind of services will you offer the customer? Will you fix bugs for free or will you charge? How will you handle changes requested by the customer? Will you answer their technical support questions by phone or email? Will you answer them immediately or within a week? Will you answer them for free or do they have to pay for a maintenance plan?

Contracts are a very important part of any business that ensure that your company and the customer are protected. You have to be very careful with the clauses you put in the contract. The recommendation here is to take a contract that someone is already using (for example from the Internet) and make the necessary modifications, to ensure that you do not leave any point out.

It is also important to put everything agreed upon in writing, because clients forget everything. It is important to be aware that if a project is finished, the client has to sign a sheet indicating that he/she accepts the delivered project.

6. Human Resource Management

If all the previous steps are done correctly, you will realize that the demand for your product will start to grow. More and more customers will want your product. At that moment you have to look for people to help you and you have another task to perform: to manage the human resources.

The process of summoning, interviewing, selecting and training someone to help you in your company will be as easy or difficult as you prefer. At EtyaLab, we prefer to train new staff ourselves to ensure that they meet our quality standards. But I know of other companies that simply hire students without giving them any training, and then if they don’t work out they let them go. Every entrepreneur decides what kind of human resource they want, so it’s up to you and your type of business.

First Lesson

So, first lesson: find someone to be your business partner. As you saw in the previous points, starting a business is too much work for one person. We tell you this because we have done it, and we both know that without each other, the road to business would have been very, very difficult. Of course, there are several types of businesses. You may want to do a business that is about reselling in Panama a product that has already been successful in another country. In this case, the amount of work may be less because you don’t have to personally develop code. But if your business idea is to develop code yourself, then developing the code and doing everything else (sales, accounting, human resources, etc.) becomes too much work for one person.

Second Lesson

Second lesson: get experience. You’re only in your first year. The reality is that when you first enter the University, you have no idea how the business world is run and how people negotiate sales. Our recommendation here is, while you’re at the University, work for other companies. You can wait until you are in your second or third year of college to start gaining work experience.

In my particular case, I worked for two companies that gave me great insight into how sales and negotiations work: GBM and SevenenCorp. GBM is a technology company that sells IBM software to different companies in Panama. Working for GBM you get to know the systems of many of the large companies in Panama. I also got to observe how GBM’s sales staff does their job, and I was able to learn how they get to sell products to large companies. SevenenCorp was a startup when I worked for them. In a startup you have day-to-day exposure to how to deal with customers, how to negotiate, how to deal with problems that come up, how to allocate the limited resources you have, etc.

If you want to do your business, be careful what kind of job you take, because another job I had was as a programmer analyst at Global Bank. I loved that job and learned a lot about programming, but I didn’t learn anything about running a business, negotiating with clients or selling. So, the message here is: if you know you want to start your own company, work in companies that will give you the knowledge you will need when you start your company.

Finally

There are a couple of books that helped us, and could possibly help you. Here they are:

• How to Win Friends and Influence People, Dale Carnegie.
  • This book is extremely important for learning how to deal with people. When you are an entrepreneur, you also become a leader, and you have to know how to lead your entire team to make the business a success.
• Scrum: The Art of Doing Twice the Work in Half the Time, Jeff Sutherland
  • Scrum is not just a methodology for developing software. Scrum is a methodology that helps you manage teams for the success of any project. This is a highly recommended reading to learn how to do things of value in a short time.

We hope this gives you the first guide to what it takes to be an entrepreneur. We’re not going to lie, it’s a lot of work, but it’s also very rewarding. Mainly, focus on gaining experience in these years that you are in college, so that when you leave you will have enough knowledge to make your own business successful.