Luck – and 4 other keys for surviving the startup phase

(Editor’s note: Geoff Perlman is the founder and CEO of Real Software. He submitted this story to VentureBeat.)

Starting a company is actually quite easy. File to incorporate, open a company bank account and you’re officially a startup. But a startup is really just the inception of a company. To me, until you have reached the point where your company is consistently profitable, you are still a startup. Getting to this next stage requires a lot of careful decision-making, hard work and a fair amount of luck.

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I founded Real Software in 1996 and aside from a small amount of money from friends and family at inception, I’ve never required any additional outside funding. Most of the lessons I have learned along the way have been the trial by fire sort.

Here are 5 tips that might save you from some of the pain I had to suffer through.

Watch your cash-flow like a hawk. – This can’t be over-stated. Cash is the lifeblood of any company. If you’ve got it, you can take risks and invest in growth; if it’s tight, you might miss opportunities when they present themselves.

Think about every dollar you spend and ask yourself if it’s really necessary – and if so, is there a way to do it for less. When I started Real Software, we worked out of my house, using bedrooms as offices for our 8 employees and my kitchen as the break room. Today, even though we’re a profitable company we constantly look for ways to do things for less.

Project your revenue, expenses, profit and cash-flow out 12 months and track your actuals against your projections. This may feel like busy work but it will help you see a cash-flow crisis before it happens. Keep a spreadsheet of your trailing 12 months of revenue, expenses and profit or loss as well and update it every month. This will help you to see trends and give you the time to adapt if necessary.

In the end, sustainable profitability is all that matters. – Millions in revenue, hundreds of employees and rave product reviews are meaningless unless they lead to turning a profit.

Sustainability is just as important. It does little good to run your employees into the ground to make a profit only to have them all quit the next month.

Make friends with other entrepreneurs. – Being an entrepreneur can be lonely. When things get rough, it’s not easy to find others you can talk to about it. Your investors don’t want to hear bad news nor does your family if they are depending on you.  You need other entrepreneurs you can talk to who are running businesses of a similar size and facing similar situations.

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You can learn from each other and there’s a certain comfort in discovering that others have dealt with the same thing. Most cities have organizations for entrepreneurs. Find one and join it. And take every opportunity to meet and befriend other entrepreneurs wherever you go. It will help keep you sane.

Be humble. – As your business becomes more successful, everyone around you may start saying that you are a genius. Without realizing it, they are actually working against you.

Oh, you might be a genius. But there is another part of the success equation that is not being considered: luck. You were in the right place at the right time. Many entrepreneurs don’t consider how big a factor luck is in their success. Believing you have the Midas touch can be the beginning of the end.

There have certainly been a number of lucky moments in my business life and I try my best to recognize and appreciate them. If you are a genius, then part of that genius is recognizing opportunities when they present themselves and taking advantage of them. In effect, by being smart, you can create your own luck or at least greatly increase it. Being humble means understanding that you didn’t get to this point on your own.

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Balance is key. – Without getting too philosophical, the universe and everything in it is fundamentally based on the principle of balance. Look for ways to balance things in your business and your life. If you have a personal life (and you’d better) then you can’t work crazy hours all the time and ignore it.

If you want employees to be dedicated, you need to treat them with respect and like adults. If you don’t, they will look for a better deal elsewhere and leave you with excessive turnover costs. The institutional knowledge employees possess is critical to your business. If you don’t have a backup, you could be in for a hurricane.

A business is a life form. The startup phase is its birth. To have a shot at long-term survival, you need to get to the point where your business is independent and profitable and you’ve found a way to balance all the factors that propel it forward.

To have the best chance for longevity, you can’t have lots of filters making the world look the way you want it to look. You need to have your eyes open and recognize the reality in front of you.

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Geoff Perlman is an Austinite and the founder and CEO of Real Software, creators of Real Studio, a cross-platform desktop, console and web development tool. An avid computer user since the age of 10, Perlman taught himself programming and has spent the majority of his career working for companies he founded.