When most people start their own business, they’re overly eager to jump straight from start to finish. In other words, you jump from the idea of making/doing something straight to how you’ll be making a profit and running an extremely successful business. Unlike a book where you can jump to the end to see who done it, beginning a business does require that you take the time to lay the necessary foundation in order to reach the successful conclusion.
With so many pieces to put together to create a successful business, it is easy to let your emotions overtake your logical business side and get caught up in the hoopla. It is important that every new business owner reviews the items to below so that they lay the foundation for a successful business.
1. A Business Plan
Before you start dreaming and envisioning the success of your new business, you need to figure out exactly how you’re going to be successful. This should begin with a business plan. How much money will your business need to make to survive one year? How about two? What is your plan to stay in business to meet the five-year milestone? A business plan is especially important if you currently have employees or plan to have employees in the near future. The plan can help you outline their roles and add some structure to your organization.
Also, your business plan should include projections and important milestones, such as revenue projections, cost projections, sales milestones, that you think your business will reach. You may be asking yourself, I have a great idea that my family and friends say will be a success, so why do I need write a business plan right away? Business relationships, loans, funding, and much more require a business plan. A house is not built without a plan, and neither should your business. Crafting a business plan lets others know you’re serious about your business and you’re not doing starting a business on a whim.
You may be asking yourself, I have a great idea that my family and friends say will be a success, so why do I need write a business plan right away? Business relationships, loans, funding, and much more require a business plan. A house is not built without a plan, and neither should your business. Crafting a business plan lets others know you’re serious about your business and you’re not doing starting a business on a whim.
2. An Experienced Business Lawyer
Undoubtedly, countless new business owners skip this important and crucial step to setting up a business. They often hold the false perception that their business doesn’t need legal help because it’s so small or that they won’t run into trouble down the road. While this theory might hold true in some instances, not everyone can escape the potentially sticky situations that can involve vendors, customer relationships or business relationships. This is particularly true if you build a business with a partner, or two. Sound agreements, whether with business partners, vendors, and customers should be set firmly in place when starting any business.
These agreements will not only protect you should a dispute arise, and trust me some type of dispute always pops it’s ugly head up, but they will also provide a backbone for long-term growth and demonstrate to your vendors and customers that this is a serious endeavor to you, not some hobby or lark. One of the things that comes up quite often in The Shark Tank is questions about agreements relating to intellectual property, loan covenants, or agreements with suppliers. They ask these questions because it is important to have these documents in place to be taken seriously in today’s business world.
Lawyers aren’t just there to help you out of a sticky situation – they can help with important components in establishing your business. Experienced business lawyers can assist in reviewing your business plan, help you decide whether or not to incorporate your business and which structure you should classify your business. Don’t make the rookie mistake of attempting to write your own contracts. Without proper legal advice, your personally-written contracts might not hold up in court if a situation occurs. Also, a really good business lawyer can provide help with recommendations relating to other professional services that new businesses need like accountants, bankers, and IT assistance.
3. Strong Marketing Plan
Many new business owners, as well as experienced business owners, underestimate the power held within marketing strategy and marketing tools. A concept commonly ignored by some entrepreneurs is that in order to sell products and services to other people they need to define their audience. Which generation of people will you sell to? Important details like defining your audience, your strategy and your message are all things that should be outlined in your marketing strategy. New business owners must ask themselves: how will you sell to your audience?
Marketing doesn’t always just apply to your own business – it applies to defining the target audiences of other entities you’re competing against within the market. You need to know enough about your competitors to know how to stay ahead of them and hold the attention of your audience and how to attract their audiences, too. While your great idea is a good place to start, determining your market, either on your own or with the assistance of a good marketing company/consultant will pay dividends in the long-run.
4. A Security Safety Net
Security can mean many different things for business owners. In addition to security being an alarm system against intruders, or a fire suppression system to protect against a fire, one oft-overlooked area of security by new business owners is insurance. The most typical type of insurance for a business is general liability insurance. This protects you against a number of claims, and depending on who you go with, can provide a number of additional coverages. A close second for businesses is worker’s compensation insurance. While Texas allows employers to opt out, most small businesses are better served by obtaining this protection for their employees.
Although not as popular and known as other business insurance options like general liability insurance, there is an option for businesses to purchase data breach insurance. Perhaps this is because business owners don’t envision computer malfunctions or hard-drive crashes that cause them to lose not only their own data but possibly their customer’s data as well.
Equally frightening is the rise in cyber threats on the web. Many new business owners probably think that when they’re just starting out, they’re too small or unknown to be targeted by cyber criminals. This is a false assumption and also an unfortunate and avoidable mistake. Cybercriminals use malware like Ransomware to target small businesses – especially mom and pop businesses – for this particular reason. The access is much easier to gain and the higher odds of small business owners paying the ransom to retrieve their data often results in a payout for them. For a more in-depth discussion on why businesses of all sizes need to think about data breach security, see our blog on Data Security Importance for Small Businesses.
If you know anything about the business world, you know that things don’t always stay the same. Markets, people, and processes eventually change and if you’re unprepared, it can be hard to keep up. As any business owner, you should maintain the flexibility to adapt when it’s necessary. You should also adopt flexibility to open yourself up to new ideas and strategies when you need to.
Starting a business isn’t an easy feat. You likely won’t be working between the hours of 9 and 5 until you become established and you probably won’t become profitable until after the first year. Sometimes, it takes even longer to reach that milestone of achieving a profit. Most importantly, you must be able to accept failure when imminent. If a plan fails or if a deal falls through, pick yourself up and get back in the game. Sometimes, you just can’t succeed without failing first.
Planning and preparation are key to any new business owners plan or startup. Having a well-written business plan, an experienced lawyer, marketing and security are all necessities to building a successful and established business. I am honored to help established and new business owners review their business plans and assist in legal advice for many small businesses and its owners. If you are in the process of starting a business, feel free to contact me for small business legal counsel and advice.