Congratulations! You’ve made the leap! You have developed a new product or service, or have seriously improved on an existing one, and you’re going to start your own business. You’ll be your own boss!
I’ve had the pleasure of engaging with many startup businesses recently as a volunteer business adviser for CONNECT (www.connect.org), a wonderful San Diego-based organization connecting entrepreneurs with business advisors, IP attorneys and other legal resources, domain experts, investors, accountants, banks, IT and marketing experts, etc. We see a great variety of businesses, and they all have a few things in common. And they all need outside help from the very beginning.
Corporate structure, business licensing, and contractual needs.
You need an attorney.
You are going to need an attorney sooner than you think. It will start with the formation of your business – Step 1! Sole proprietor? S-Corp? C-Corp? LLC? If it’s a corporation, in what state should you establish it? Who are the shareholders and the Executives of the company? What are the corporate by-laws? How do you register to do business, or get a business license in, your city, county or state? Do you need a professional license for yourself or your business? Must you file for a fictitious name permit? Must you register with the Secretary of State?
Even if your business is not in the US, you should immediately get an attorney to help you understand and navigate the regulations in your area. And this is just the beginning! You will need contracts for your customers, suppliers, licensors or licensees, employees, independent contractors, and others. And you will need advice and help along the way. Ideally you want one in a firm having attorneys with different business specialties.
Where do you find one? First, check with friends and family. Seems everyone knows an attorney and referrals are the best way to find someone. If you are referred to someone who can’t help you, ask them for a referral. No luck? Contact your local Chamber of Commerce and ask about local Small Business Support Services. Research business owners’ groups in your area. Two I recommend are Vistage International (www.vistage.com), and Service Corps of Retired Executives (SCORE) (www.score.org). Finally, seek referrals from local Angel Investment or Venture Capital groups in your area. These groups are chock-full of resources and actively seek entrepreneurs who need help. Find your attorney!
You may not need, or have the resources for, a business loan right away, but you will need to open a business checking account at the very least. A great business banker – one who takes the time to get to know you and your business and understands your needs – can have a huge impact on your success. You will need a company credit card, and you may want merchant services to process your customers’ orders on their credit cards.
As your business grows, you’ll want to establish a line of credit for your business – even if it’s a small one. Should you factor your accounts receivable? Should you get an A/R line of credit? A good banker can advise you on these financial tools, and will grow his or her services as your company grows. And yes, they will ask you to sign a personal guarantee. And yes, if you’re committed to your business, you will. I have a great banker who began with me when my second company was in its very early stages with only four people in a tiny shop. He helped us finance our growth to over $26 million in sales and 60 people (I sold the company), and he’s my banker for one of my existing businesses today. We’ve become friends along the 17-year path and I recommend him at every opportunity.
Where to you find one? Again, I am a big fan of referrals. Start with your local bank where you already have an account and ask them if they have a business expert in-house. If that doesn’t work, pursue the same path I described above. Here’s the catch: you’re looking for a real person, not an email or web form to be filled out online with a large, faceless institution. This is a relationship you’re going to want to build and maintain over the long term. Ask him or her to visit your office – if you have one. If not, ask for a face-to-face meeting at their office, or at a coffee shop, and come prepared with information on your company – a PowerPoint presentation, your website, a product sample, and your business plan. I cannot emphasize enough how important this relationship will be for you and your business! Get a great banker!
Accounting and tax planning needs.
At the end of the year, your firm will be filing tax returns. (Yes, plural). A good CPA will more than pay for her/himself by helping you with deductions, tax strategies, filing, regulations, and so on. It’s important to establish your accounting framework immediately however, because you – or someone you hire – will be doing your books starting day one. The CPA will recommend software or a cloud-based service to use, and has book-keepers he or she can recommend based on your business needs and budget. He or she will advise you on establishment of your fiscal year, compensation strategies as you grow, retirement plan vehicles (401K, IRA’s, non-qualified plans), income deferral strategies, insurance needs, mergers and acquisitions, and a whole host of other financial and tax issues along the way. Like your banker, you should look for someone with whom you can build a relationship for the long term.
How do you find a CPA? Start with your banker – presuming you found one! If not, then go the referral path as described above. Again, most people in these three professional groups – attorneys, bankers, and accountants – network professionally and know a lot of people who can help you. Get your CPA!
One final word on these three professional relationships: while I recommend working with people over the long-term, it is vitally important that you shop around after a few years, and make sure you are still receiving the value you desire and need to keep your business growing. Let them know you will be doing this. It keeps their “pencils sharp”, and keeps them engaged. Your customers will be doing exactly the same thing to you! And this is business.
Go build your team!