New Year’s resolutions are doomed to fail. Don’t get us wrong, we’re all for resolving to be better! Just not on the one day of the year when you’re quite possibly the most hungover.
Instead of resolving to work out more or eat better, why not take the new year as an opportunity to jump-start that business idea you’ve been planning?
But before we get going, here are some great things to consider before your new business launch:
Understand the Market and Your Competitors
If you can’t beat ’em join ‘em, and if you don’t want to join ‘em… beat ‘em!. Knowing who you’re competing against and what the market looks like will help you determine what your business’s differentiators are. Your research could consist of looking at how many close competitors you have, what they’re doing, and how your business is different, better, more streamlined, more tech-savvy. Looking at the strengths and weaknesses of the current market can help you position yourself to outperform existing competitors.
Once you have completed your research to identify who your competitors are, your next task is to figure out what you can offer to outperform them. Coming into an already saturated market means you’ll need to determine your niche, stake your claim, and defend your right to be there!.
One foolproof way to position yourself to win is to identify your consumer’s pain points and then solve them better than your competitors. Who are your customers? What do they need? How can your product or service get them where they need to be? If you can’t answer these questions and position your business to provide those answers, your next step might be to target market insights and do some business planning.
Determine your Business Structure
When establishing a new business one of your first steps is to decide what type of entity you want to establish. There are pros and cons to each different type of business formation. Some of which include the following:
When forming a new business, one of the first steps is to decide on the type of entity you want to establish. There are pros and cons to each type of business structure. Here are some general guidelines:
- Limited personal liability
- Less paperwork
- Tax advantages
- Management Flexibility
- Flexible Profit distribution
- Franchise taxes
- Banking records
- Separate records
- Ease of establishment
- Easy tax preparation
- Personal liability
- Difficulty raising capital
- Lack of structure and sophistication
- Personal protection
- Access to capital
- Perpetual existence
- Double taxation
- Extra tax filings
- Complexity of management structures
Seek Legal Counsel
One of the hardest parts about trying ANYTHING new is not knowing what you don’t know. Anyone who’s been around the block knows it’s best to get it right the first time! Speaking to a lawyer or a professional in your field can ensure you prevent any headaches before they start, and that nothing falls through the cracks.
Obtaining legal counsel in the early stages of your business forms a relationship that will benefit you throughout your business journey. Getting your business up and running is just the tip of the iceberg. Legal counsel will continue to serve you as your business continues to evolve, and new challenges arise.
But don’t worry, once you’re up and running, you should be good to go for the foreseeable future.
You’ll want to consult a legal partner again in the event of a merger or acquisition when clarifying distribution agreements, franchising, and even sometimes when making sales. Having access to legal counsel will streamline your process and protect your assets.
A well-made business plan has specifics on projected P&L, cash flow, hiring needs, the scope of work, and budget (among many other facets). When seeking investment or funding, you’ll need to present your proposed budget for the upcoming year. Your budget will, of course, include expenses such as equipment, rent, and payroll expenses, but don’t forget to budget for legal counsel, filings, and bookkeeping services.
Whether applying for a loan, finding investors, or investing your own capital, you need to be sure your business is well-funded before you get the ball rolling.
There are various ways to secure funding for your business, It’s important to determine which of these options will work best for your business. These are the high-level of three initial options:
- Self-funding: If you have the personal assets to fund your own business, that may be a great option. It leaves you with few strings attached to your assets,, it is not always an available option, and it also means you risk your own capital.
- Investors: Bringing in investors is a great alternative if you have a business venture that an investor is interested in supporting. Working with investors can be tricky and is an aspect of your business formation for which you’ll want to consult legal counsel. You’ll need to ensure that your partnership is detailed including documented investment amounts, rates of return, and what level of input into your company their investment allows.
Loans: If you want to keep complete control of your business rather than handing over some amount of say to your investors, taking out a business loan may be your best choice. When applying for a loan, be prepared to explain your budget and business plan to the lender. Bring your business plan, expense sheet, and financial projections for the first 3-5 years of operations.
Register Your Business
Regardless of what type of business entity you decide to establish, you’ll need to register your business in compliance with federal, state, and local laws. The state where your business operates determines how you must register your business., but all businesses also need to be federally registered.
Registering your business to comply with federal laws and regulations is an important step in the formation process. Federal registration is a relatively simple process that can be accomplished through the IRS website. Part of this process includes obtaining an Employer Identification Number (EIN) which allows your business to hire employees and pay federal taxes.
With your business plan in hand and ready to go, you’re ready to tackle the new year. I told you you looked ready! Get started by reaching out to our team of legal experts at @VirtualCounsel. We’ll answer all your questions, and help you get set up right.