Indeed, starting a new business can be intoxicating, but emerging companies also face a legion of challenges that determine their success. We believe that a company’s ability to conquer these obstacles lies in having the right information and support in the initial stages of growth. Here is a list of key considerations for start-up companies.
1. Define the Business’s Goals and Create and Intention
Most startup emerging businesses have the broad strokes of an idea, but they fail to boil the idea down to particulars. The particulars, though, are the ingredients that can make or break a business.
Be sure you define precisely what you want from your business. This includes not only defining your product or service, as well as the market, but also outlining your long-term goals: How long do you want to be in the business? Who are the people you want in the business with you? What are the threats to your success? What opportunities do you have?
There is no shortage of techniques you can use to create such a business plan. We use two tools created by Dan Sullivan of The Strategic Coach® to outline the objectives of our clients: Sullivan’s DOS Worksheet® identifies a company’s dangers, opportunities, and threats. The Impact Filter® helps our clients determine which actions will most likely result in the desired effect. Regardless of which tools you use, creating an intention will help you arrive closer to your desired destination.
2. Beware of Being Undercapitalized
Know how much money you have to invest, as well as whether it is enough to give you a fighting chance at success. Certainly, you can find a sundry of success stories about companies that have flourished on a shoestring budget, but successes of this kind are often the exception and not the rule.
The truth is that undercapitalization can create conditions that force a business owner to skimp on critical investments that would otherwise allow a company to cross the line from mediocrity to success. Be sure to seek the help of professionals who can help you determine how much money you need, where you can get money to sustain the business and what type of funding is best fitted for your start-up (Note: Most emerging companies will not qualify for bank loans. If you are relying on the help of a bank loan, talk to a banker to see whether your company will qualify.)
3. Determine the Business Structure that Best Fits Your Growth Objectives
Determining the best business structure for your emerging business requires assessment of the distinctive financial and tax benefits provided by the different types of entities. If this feels daunting or confusing, consult with your advisors who can help you analyze your options and choose the right type of entity. Whether your company is a corporation, a limited-liability or a partnership, you will need the appropriate agreements related to ownership, control and compensation.
4. Register with Tax Authorities to Obtain a Tax ID Number
Register your entity with the government agencies at the federal, state and local levels. Failing to do so likely will result in large penalties, which will be assessed in future years. Registering your business, applying for the proper permits and filing for licenses is important in all instances, but particularly critical if your business has interstate commerce. When it comes to capturing potential revenue from commerce, states have been aggressive and are expected to be more so in the future.
5. Set Up Effective Accounting and Bookkeeping Systems
Tracking your assets, liabilities, income, and expenses by using QuickBooks or another accounting software, will provide you, your bookkeeper or your CPA with the financial reports needed to understand and forecast the financial health of your business, as well as assist in identifying financial challenges before they become problems. In many cases, using a competent outside bookkeeper or your CPA can initially minimize the costs when compared to hiring an employee (though it bears noting that your goal is to be self-sufficient when it comes to maintaining your systems).
6. Be Aware of Tax Planning, Incentives and Compliance Related to Your Business
Tax laws are often overly complex, confusing and filled with compliance challenges that can hinder and sometimes even cripple a business. But tax laws are also an important government tool used to reward specific activities and provide incentives for investments and numerous business activities. Local, state and federal tax laws are packed with opportunities for taxpayers to reduce their tax liability. Educate yourself so that you can take full advantage of these opportunities and understand the tax implications of the decisions you make as your business grows.
7. Treat Your Employees as Assets
Critical to recruiting and retaining the best team possible is a competitive benefits package. Ask your benefits broker to educate you on the options available to best fit your budget and needs. After all, the happier your employees, the better environment you have for growth.
On a related note, be sure that you create a handbook and set of work rules that are compliant with your local jurisdiction’s human resources statutes. Don’t just state the rules—follow them and believe in them. If you are required to give your employees breaks, do it. If you are required to pay overtime, pay overtime. Nothing can bring a startup company to its knees faster than angry, litigious employees.
8. Protect Your Property and Your Relationships
In the initial stages of a business, ideas and agreements too often are only loosely and informally acknowledged. Be sure to:
- Protect your intellectual property by understanding and making use of copyright and trademark law
- Formally document expectations with your business partners, angel investors, family and friends, and other potential investors
9. Surround Yourself With the Right Key Advisors
This may all seem formidable, so surrounding yourself with the right advisors can make this initial stage of your business’s growth much easier. Having innovative and highly skilled key advisors to assist you will provide a solid foundation to facilitate your business’s success and growth. It will also provide you peace of mind and confidence in knowing that you have experts who can handle the unexpected challenges that might arise at the beginning and during the growth cycle of your company.
Your circle of key advisors might include the following:
- Insurance Provider
- Retirement Plan Advisor
- HR Advisor
- Management Consultant
- Investment Banker