What can you do to increase your chances of a successful startup?
By Barry J. Bendes, Partner
Edwards Wildman Palmer LLP
Planning is the key to success. Before you open the doors to your new business, you should take the time to plan for your successful startup and to put into place a structure for long term profitability. This means that you must anticipate and understand the issues, milestones and hurdles that you will face in the startup phase and soon thereafter and look for solutions to problems before they occur.
Keys to your successful startup
1. Choose a business you understand
Whether you decide to purchase a franchise or open your own independent business, it is important to “learn the business” (how it runs, where and how it makes its sales and profits, what its costs will be, and who will be needed to make it thrive). Take time to speak with others who are in the same or allied businesses. Meet prospective vendors, bankers, customers, dealers, franchisors, brokers, etc. Carefully read industry literature and any franchise disclosure documents, agreements and system documents you may receive. Show them to your advisors.
2. Build a realistic business plan and keep it current
Taking the time to draft a business plan and keeping it current is crucial to a successful startup and long term success. The business plan need not be lengthy, but should encompass all of the critical aspects of the startup phase and daily business. It will help you to identify areas where you have the requisite skills and where you will need help. There are many templates, books and software programs to assist with this step. The plan must detail how you will secure the money to run the business, the name of the business, why it will succeed, the products and services it will offer, who will be its customers and competitors, its location, costs to build out and open the business, critical employees and skill sets, licenses and permits, etc. Be realistic. Bankers, other funding sources and landlords will ask to review your business plan. You should recognize that it will take time before your business will provide you with money to live on. Funds will be needed for the build out, purchasing and carrying of inventory, paying salaries, delivering services, collecting on sales and loan repayments. Then, if there are profits, you can include provision for a distribution or salary to the founders.
3. Only engage knowledgeable advisors
Experienced advisors can help you to succeed without making the mistakes that cause so many startups to fail. A good business accountant who is familiar with the type of business you are starting can point you in the right direction on a variety of topics and can assist with setting up your records and the timely payment of taxes (avoiding penalties and interest). Your accountant and attorney can advise on choosing the right form of entity (corporation, LLC, partnership, sole proprietorship), and with employment, franchise, leases, licensing, and other key matters. Keep these points in mind to plan for your successful startup.
4. Choose a great name
A name is more than just words. It gives a first impression to the public. It sets you apart from your competitors and helps customers find you and come back again. Always check the internet, local telephone listings, the US Patent and Trademark Office (www. uspto.gov) to determine if someone else is using the name you want to adopt before you spend for signage, advertising and incur other costs. Protect the name by filing it with the state or local filing office, and with the USPTO if your advisors recommend such a filing.
5. Execute a written agreement among the owners
If there are going to be multiple owners, it is critically important to have an agreement among the owners dealing with such things as restrictions on transfer of ownership, rights of first refusal, what happens on the death or disability of an owner, non-competition, and which owners are responsible for what functions and decisions. Without such an agreement, costly and disruptive disputes frequently arise among owners greatly reducing chances of a successful startup.
6. Set up and keep good records
Without good systems and accurate records, you will not know if you are making or losing money, or be able to pay your bills, file tax returns or pay your taxes. Your accountant will be key to helping you to establish and keep good records ensuring a successful startup.
7. Hire the right people
Hire or associate with reliable people that know what they are doing and have the skills and experience you will need. Make sure that you are and each prospective employee is not prohibited from working for you under secrecy, non-competition, non-disclosure or invention agreements.
About the Author
Barry Bendes advises businesses and their owners in startup and ongoing business matters and is a member of his firm’s “Helping Innovators Thrive” team. He can be reached at 212.912.2911 or firstname.lastname@example.org. Visit www.edwardswildman.com to learn more.