Forget all of the advice that you’ve heard from bright lawyers, accountants, Angel investors, venture capitalists, and other high-level advisors. Most of it is wrong. You don’t need to be well-funded, have a buttoned-up business plan, and all that smart. Trust me – my first attempt at a startup taught me what not to do even though I thought I was keeping costs down and listening to the right people. I’m not a proven entrepreneur and it remains to be seen how successful my startup eROI will be, but here is some of my candid, unconventional advice for first-time entrepreneurs:

1. You’ve got to be naive and a little insane. How is being naive an asset? As a first-time entrepreneur of a high-growth company, naiveté of the challenges you’ll confront is a requirement. Otherwise, you’d never start your company in the first place. As the Adidas ad campaign says, “Impossible is Nothing.” A few simple truths: you’ll get close to bankruptcy at least three times in your first couple years. Which leads me to my second bit of advice:

2. Don’t worry, be scrappy. Cash flow is everything. If you need to incorporate your company, start with online resources like www.filinginoregon.com and talk to a small law firm that will quote you a small project fee to guide you through this process. Manage expectations and always ask how much things will cost before having a vendor start the project. If possible, recommend a partial trade-out for product or services that you can offer the vendor.

3. Do NOT write a 40-page Business Plan ever (until you’re no longer a startup)! Write a 2-3 page Executive Summary where you focus on how your company makes money and how quickly that will happen. Do not get carried away with how big the market size is or how popular or unpopular your niche is in the investor community – it does not matter. All that matters is that you address a need in the market with a unique solution or approach and that you make customers happy. But don’t settle for that, turn customers into evangelists for your brand. If you can begin doing that early on, you won’t need to rely on outside funding and investment will come to you when you don’t even need it.

4. Network, network, network with other entrepreneurs and with as many people in your industry as possible. You’ll find partners, customers, employees, speaking engagements, and great ideas among this group of people.

5. Balance is the secret of life. Most first-time entrepreneurs work 80 hours per week and it shows. They look dead tired, even though the overwhelming passion puts a warm glow on their fish-belly white complexion. The ironic thing is that entrepreneurs with more balance can think more clearly and work strategically on the business instead of in the day-to-day business. Get some sleep, go on a hike, bike ride, or get some turns on the ski slope. Your company will be better for it.

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1. Focus on cash flow, not profitability. The theory is that profits are the key to survival. If you could pay the bills with theories, this would be fine. The reality is that you pay bills with cash, so focus on cash flow: a small upfront capital requirement, short sales cycles, short payment terms and recurring revenue–and pass up the big sale that takes a year to close and collect. Cash is not only king—it’s queen and prince, too.
2. Forecast from the bottom up. Most entrepreneurs forecast top-down: “If 1 percent of U.S. car owners install our satellite radio systems, that’s 1.5 million systems.” The bottom-up forecast: “We can open 10 facilities that each install 10 systems a day.” Guess which forecast is more likely to happen?
3. Ship, then test. How can I recommend shipping stuff that isn’t perfect? “Perfect” is the enemy of “good enough.” When your product is “good enough,” get it out, because cash flows when you start shipping. By shipping, you also learn what customers truly want you to fix.
4. Forget the “proven” team. They’re overrated. Hire young, inexpensive, hun-gry people with fast chips, but not necessarily a fully functional instruction set.
5. Start as a service business. Say you want to build a software company: Provide consulting and services based on your work-in-progress software. This has two advantages: immediate revenue and true customer testing. Once the software is field-tested, flip the switch and become a product company.
6. Focus on function, not form. Mea culpa. I love good form: MacBooks, Audis and Breitling watches. But bootstrappers focus on function: computing, getting from Point A to Point B and knowing the time of day. All the chair has to do is hold your butt. It doesn’t have to look like it belongs in the Museum of Modern Art.
7. Understaff. Many entrepreneurs staff up for what could happen, best case. Bootstrappers understaff, knowing that all hell might break loose.
8. Go direct. The optimal number of mouths between a bootstrapper and her customer is zero. Sure, stores provide great customer reach and wholesalers provide distribution. But e-commerce was invented so you could sell direct and reap greater margins.
9. Position against the leader. Toyota introduced Lexus, claiming it’s as good as a Mercedes-Benz but half the price–Toyota didn’t have to explain what “good as a Mercedes-Benz” meant. How much do you think they saved? “Cheap iPod” and “poor man’s Bose speakers” work, too.

Find out how deep the rabbit hole really is. The equation is simple: amount of cash divided by cash burned per month. As my friend says, “The leading cause of failure of startups is death, and death happens when you run out of money.”

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