Starting a business is an adventure. To ensure it doesn’t become a nightmare why not learn 10 things to avoid when starting a business. Read on to learn what pitfalls to avoid and how to save yourself some valuable time, energy, and even money.
Not everything is DIY. There are plenty of “do it yourself” legal forms available on the web, and when you are just starting out, it is tempting to think they are of great value. A lawyer can advise you as to what type of entity might be best for you, how to set up your capitalization structure and identify other optional terms that are beneficial and how to maximize your tax planning strategies- you can’t get that from an online form. Want to know how to hire a good lawyer, view this article – from the Federal Trade Commission on “Hiring a Lawyer” to get started.
2. What’s in a Name? Your business name is part of your brand. Before you select the name of your entity and spend money on branding your company name, it is worthwhile to make sure that your name is unique and distinct. Google the name to make sure there aren’t already 20 businesses with similar names which might later keep you from using the name or create issues for your brand. This is why it’s #2 on our list of the Top 10 things to avoid as you start your business. You have to name it to claim it and choosing the right name can make or break your company’s chances to grow successfully.
3. Unlicensed? Most businesses generally need a business license. If you have multiple locations, you will likely be required to have more than one local license, and each state has its own licensing requirements. Certain professions require additional licenses. The failure to obtain certain licenses can result in civil and criminal penalties. Check here to see what’s needed in your state.
4. Accountants and lawyers. Not meeting with professionals, in the beginning, can cost you a lot more money in the long run. A lawyer or accountant should tell you how to structure your business to be flexible for changes and maximize tax savings. A good professional should work with you in developing a strategy as to when and where to spend your money for their services for the greatest bang for your buck. Not sure what to look for in an accountant, start here.
5. Winging It. All businesses should develop a business plan. This should include what you would like your business’s goals to be in the immediate and long-term future. Your plan should also develop realistic steps to help you achieve those goals. You should revisit your plan frequently to update it as your business changes and share it with your advisors.
6. My Word is My Bond. Unfortunately, someone’s handshake or verbal promise can no longer mean that a deal is final and binding. Memories are short and even those with the best of intentions can find themselves with a disagreement about what they believe they agreed to. In order to best protect you, if you are counting on that order, agreement or promise – get it in writing. This is the only way that you can be certain that both you and the other party are on the same page.
7. Agree to Agree Later. If you go into business with anyone other than yourself, it is very important to make sure you have an agreement upfront that outlines key decision factors. It is worth the money to invest in a buy-sell agreement or an operating agreement that contains detailed transfer provisions and management provisions to provide a road map in the event of a dispute. If you can’t agree when everyone is excited about the new business, you won’t when a dispute arises. Disputes cost a lot more.
8. Forgetting to Pay the Tax Man. There are more kinds of taxes than there are days in the month. In some instances, the failure of the business to pay the taxes can result in multiple fines and penalties and sometimes personal liability to you. Therefore it is very important to talk to an accountant to make sure that you have the proper accounts set up to pay the appropriate taxing authorities, and that you are remitting taxes properly.
9. Not having an exit strategy. It is important that when you start the business that you consider how you want to exit the business. This could be a plan to sell your company to a third party, to future employees or passing it along to future generations. It also is worth considering what would happen in the event you become disabled or die. Your exit strategy should be incorporated into any buy-sell agreement or operating agreement.
10. Not watching your cash. As important as revenue is, it is important to manage your cash flow. This isn’t a legal issue, but a business one. We put this at #10 on our Top 10 things to avoid when starting your business, but really – it could be #1. Proper cash management is critical to your business’s viability and long-term success. So is personal cash management. To learn more about effective personal cash management click here.
So these were the Top 10 things to avoid when starting a business, to learn about more things to watch out for visit the SBA’s small business site by clicking here.