You can see the request here on the right, posted to me on Twitter. I decided it’s a good subject for a blog post here, and I went on my own first as a service business and survived that way for 12 years before Palo Alto Software finally established itself as a product company.  So I do have some tips I can share.

1. Set your goals right and define success well. Service businesses generally take less start-up capital but are also much less likely than product businesses to offer eventual leverage and scalability. There are exceptions, but in most service businesses the assets walk out the door every night. Those businesses are relatively easy to start, relatively easy to survive and prosper with, but also hard to grow beyond small, hard to sell, and hard to attract outside investors.
2. Look for a business anchor. That’s a former employer and/or a strong client.  For example, I had Apple Computer, a former client, and Creative Strategies, a former employer, both willing to contract my services from the beginning. Apple remained critical to – and loyal to – my business services from the beginning in 1984 until Business Plan Pro changed the business to product-driven in 1994.
3. Understand your first client is twice as hard to get as your second. And the second is a third harder than the third. Land those first few clients well. Make sure they’re happy. Give them a huge discount to get the relationship going, and expect to keep your rates low for them, but ask them, in return, to not tell strangers what they pay you. Work free if you have to. You need references and testimonials.
4. Find a focus. Be different from anybody offering similar services to similar clients, in a way they can understand immediately and will share with others. Example: I was a business plan consultant who had a fancy MBA degree, no big deal; but I had also built my first computer, programmed extensively, lived in Latin America, and spoke fluent Spanish. My clients tended to be high-tech companies doing international business.
5. Use social media and blogging and your website as your main tools for marketing. Create and share content that validates your expertise. Your marketing today is so much easier than it was when I went out on my own; where I had to get through editors and publishers and conference organizers to get my expertise in front of clients (specifically, I wrote magazine articles, and books, and I spoke at COMDEX and the like), you can do it yourself by posting on blogs and Twitter and Facebook and LinkedIn. And, soon, RebelMouse. Oh, and that reminds me: Read Duct Tape Marketing, by John Jantsch.
6. Spend wisely on your logo and look and feel. Look into 99Designs, I’ve seen some sensational work from them. A professional look to your logo and website (or Twitter or Facebook or LinkedIn profile, if that’s all you do for a website) is really important. It isn’t a matter of business cards or stationery anymore, but it is how you represent yourself.
7. Don’t ever spend money you don’t have. You’ll get lots of suggestions for ways you can spend money now to make money later; mail lists, marketing programs, they never stop.
8. Don’t ever lose a client. Repeat business is vital. Keeping your existing clients is way cheaper and easier than finding new ones. Always go that extra mile, when you have to, to keep your existing clients happy.
9. Know your numbers. If you don’t know the difference between sales and money in the bank, between profits and cash, learn it. It’s vital. Know your numbers like the back of your hand.
10. Never compromise integrity. You’re going to succeed or fail based on your reputation. Don’t cut corners with credibility.
11. (Bonus point) Expect to make mistakes. If you can’t acknowledge and learn from and apologize for your mistakes, then you’re doomed. You will make them. If you think you won’t, keep your day job.
12. (Second bonus point) Do your own simple, practical business plan. Do it for yourself, not outsiders. Make it just big enough. Keep it fluid and flexible and review it often and revise it frequently. Read The Plan-as-you-go Business Plan, by me. Sign up for www.liveplan.com. [Disclosure: I’m the author of that book (but I’m linking you to where you can read it free) and I own Palo Alto Software, which publishes liveplan, a web app for business planning.]