“The process of learning requires not only hearing and applying but also forgetting and then remembering again.” – John Gray

As a favor to an old friend, I’ve begun working with his start-up company. It’s low-tech — and funding comes mostly from a whopping home mortgage and several shaken-down relatives. I don’t know how it’s going to work out for him, but I’ve been pointedly reminded about business basics in a way that working with a gazillion-dollar firm can never do. Here are 12 lessons learned.

1. Gotta love that product.

The Economist recently reported on companies that out-innovate the competition year in and year out. They shared one thing in common: “an unnatural obsession with what they produce.” The issue is not to have just a “good product” but a product that’s clearly special. Your daughter, son, spouse, aunts, and uncles — and then the professional folks you talk with — have got to glow when you show them your sketches and prototypes.

2. Sales beats marketing.

I believe in marketing, but it’s become clear to me that sales come first. There’s no bonanza for the world’s greatest widget until there’s a completed connection with the customer. We began by thinking we needed an inspired marketer with some sales background. Now we are convinced we need an inspired salesperson — with some marketing history. And, incidentally, the sales point person must love the product. The “job” must be a labor of passion, not a day at the office or a bullet point for the resume.

3. Great people.

“People are everything.” Every business says it; only a handful live it. But in a start-up, your top employees must be “planet class.” We are looking for the best people and spending gobs of time we just don’t have on interviews. At the top of the list: Work only with people you like (as well as respect). On occasion, we’ve met with superstars, been wowed by their command of their specialty, but not liked them for some wholly subjective reason. Our decision: not to work with them, period. Life’s too short.

4. Be prototype-happy.

Prototyping is the No. 1 “core competence” for an innovative company. We’re spending ourselves half-poor on prototypes. The best way to enthuse prospects is (surprise!) with product, not concept; moreover, give them an inkling of the breadth and depth of the eventual product line. My instinct, his instinct, and that of all our advisers tell us: prototype, prototype, prototype!

5. Systems aren’t an afterthought.

For the little firm dealing with national accounts, it’s “one strike and you’re out.” We are already knee-deep in business systems, inventory management, and database management. We simply want to know, record, and leverage every dollop of information we come in contact with. We are not into gold-plating, but we are committed to systems that are solid, substantial, broad, and deep.

6. Act big from the get-go.

We’re following the “think-big, act-big law of self-fulfilling-prophecy strategy.” That is, we are not going to expose our start-up to the market until we can be a noticeable, commented-upon presence. We’re producing marketing material, going big league in trade-show presence, launching a serious ad campaign, and chintzing on nothing that will allow us to be perceived as “a player” from day one. All of this is being done, of course, within the bounds of modest capitalization. It’s a matter of priorities, and this is a big one.

7. A plan.

We have a prospectus, but that’s not the key. Neither are the pro formas. What’s turned out to be the planning essential is the humble timeline. Now five single-spaced pages long, including milestones monumental and mundane, it’s on everybody’s computer and is plastered on butcher paper on the walls. It is reality. It is how we think. How we debate. It’s our paramount talking document with potential partners.

8. A philosophy.

We want to have a business we can be proud of in all respects (great place to work, ethical to a fault, diversity is our middle name, etc.), or we don’t want to be in business at all. Again and again, call it crunch time — which happens all the time in a start-up — we come within a hair’s breadth of compromising on this or that; and then, so far at least, we step back. The time to do it right is from the start and all the time, not just when it becomes convenient.

9. A clear signature.

In a want ad, we asked for a “wildly enthusiastic, bizarrely committed” individual. Some friends scolded us: “You can’t use language like that. It’s not professional!” “It’s who I am,” my friend said, “and what we want. Why can’t businesspeople use real people’s language?”

10. Improv skills.

My friend knows what he is about. I agree with his rigidity about what makes his baby his baby. On the other hand, we are making decisions that take us SSE one week, NNW the next. “We run like mad, and then we change direction” is the way Chairman Bert Roberts describes MCI’s strategy. We, too, are trying to be masters of improv.

11. Grains of salt.

We’ve consulted with perhaps two dozen incredible folks — and we have benefited enormously from their wisdom. But they all seem to be in utter disagreement. Each has a clear theory of the market that has served him or her well. Thus, we listen, learn, sift, and — with fear and trepidation at eschewing such good advice — go our own sweet, determined way.

12. Fun.

“Are we having fun?” We’re dead tired is what we are! But alive and wired — and having fun. And if anything we do smacks of dreary business-as-usual, the way “they” do it, we draw back in alarm. You might try what I’ve tried. It’s been my best learning — relearning — experience in 10 years!

(Ed. Note: Business guru Tom Peters is a best-selling author and the president of the Tom Peters Group in Palo Alto, CA. The above essay is one of thousands of articles about leadership, management, and business success that are available on “the Instant Consultant” CD from Executive Excellence Publishing.)