10 Things You Need to KnowHere’s a quick overview of key issues.
01
Failing to Plan is Planning to Fail
Before you invest a penny into a business, you should have a written business plan and marketing plan. While you might have a great idea for a business in your head, no one can provide you with meaningful feedback on its strengths and weaknesses without being able to read and study it. The Small Business Administration’s website has hundreds of great resources for business and marketing plans, and can even put you in touch with a mentor in your area to help you develop and improve them.
02
You Need to Have an Exit Strategy
When venture capitalists look at investment opportunities, one of their biggest considerations is how they can get their money out after they receive a return on their investment. However, most small business owners never think about their exit strategy. Whether you want to eventually sell your business, make it a publicly-traded company, or merely leave it to your children, a realistic and tangible exit strategy is one of the most important aspects of a business plan.
03
Prepare for Change
Without question, your business will have to adjust to a number of changes in order to be successful in the marketplace. As a result, your business plan has to be able to handle change. If the success of the business completely depends on approving a patent application, obtaining a particular location, keeping an employee, or maintaining a customer, it’s important to insure against the risk of loss and consider potential alternatives.
04
A Good Name is a Great Asset
Most business owners don’t put a tremendous amount of thought into the names of their products or services. However, a catchy, memorable name can make a huge difference in a competitive marketplace—even more so by having a corresponding domain name, facebook and twitter account, and trademark.
05
Get Others Involved
No matter how experienced you are, or how well you know your business, there will be moments when you need advice on accounting, tax, legal, or other matters. If you’re faced with a problem, and there is a potential risk or penalty associated with making the wrong decision, hire a professional. Any expense associated with their advice will very likely save you time and money in the long run.
06
If It Has Happened to Others, It Can Happen to You
No business is immune from problems. No matter how careful you are and how fantastic your products or services are, customers can still sue you, vendors can still breach contracts, and third parties can steal your intellectual property. The issue isn’t whether these or other problems can happen; the issue is whether you’ve put a plan into place to protect your assets and legal interests when they do.
07
Understand the Difference Between Investments and Expenses
Many business owners get into trouble when they structure deals as investments, when they are actually expenses. An investment is an outlay of some resource (time, money, or effort) towards the expectation of profit, while an expense is an outlay of profits to obtain some resource (time, money, or effort) from another. Simply put, if you can’t quantify a rate of return, it’s an expense—don’t let vendors convince you otherwise when negotiating an agreement.
08
Eventually, the Government (or the Plaintiff) Will Find Out
Small businesses frequently don’t follow legal formalities that closely when starting out, like obtaining business licenses or making local and state filings. However, the penalties for not doing so can be severe, including closing your business, subjecting you to fines and imprisonment, or making you personally liable for corporate debts and judgments. When you consider all the risks, it’s just not that expensive to hire an attorney and ensure you’re in compliance.
09
The Best Way to Win a Lawsuit Is To Prevent It in the First Place
You can’t completely insulate your business from every potential lawsuit, but you can take a number of steps to protect your business by incorporating dispute resolution clauses and expressly limiting liability in all your contracts and commercial agreements.
10
Do Something You Enjoy
Nearly all of our clients are as passionate about their businesses as we are about practicing law. We believe this is important, since passion leads to energy, energy leads to momentum, and momentum leads to success. While there are no guarantees in life, or with any business venture, we find that people who truly enjoy their businesses tend to succeed far more often than those who don’t. If you’ve found something that you enjoy doing, and you need help with structuring, financing, agreements, or intellectual property, we’d love to talk to you. Give us a call at 704-325-9325 to schedule a consultation and get started.
Author: Nathan Workman
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