For entrepreneurs, coming up with an idea or concept for a new business is easy. However, many fail to take the proper steps to ensure the success and longevity of their business. I have compiled a list of items that are essential to every new business venture. Yes, these items take additional time, and yes the items require some work, but it’s an absolute guarantee that completing these steps BEFORE you begin your business venture will save you the same valuable time, work (and headache!) in the end. Please do NOT set up your new business without these!
1. Business Plan
A business plan functions as a roadmap for your new business. Business plans can be very detailed. Detailed business plans can include target dates to track a company’s progress, financial projections for upcoming years, scheduled events, marketing plans, budgets, dissolution plans, and any other category of information that a business owner wants in their business plan. By the same token, business plans can be very general and may only contain key information that the business owner considers important.
Whether detailed or general, business plans should contain enough information to keep the entrepreneur on track to achieve the goals and stated purpose of the business. The goals and purpose of a business are vital to a business plan because it helps the owner stay focused when developing new products and services, when undertaking new ventures, and when describing the business to others. This leads to one of the most important reasons to have a business plan- financing!
Any bank that lends money to a business requires a business plan and a detailed business plan at that. The same is true for angel investors, lending institutions and private investors. These individuals and entities want to know what your business is about, what your business plans to sell, how your business plans to sell it, and how it will benefit them in the long run. If you’re not able to invest the time into a business plan, then your business will probably have a hard time finding an individual or entity to invest in your business.
2. Qualified People
Many people start small businesses with the dreams of starting family empires. While there is absolutely nothing wrong with this, it’s very important that the people you decide to align with your company- whether as a board member, officer, or employee- are qualified. If you plan to open a restaurant, this does not mean that everybody that is affiliated with your business should have restaurant experience… but it DOES mean that you should have people with business knowledge, some with experience in the food industry, and some people who are extremely well connected to give you an edge over your competition.
Many investors give strong consideration to a company based on the team of individuals that comprise a company’s board of directors, executive team, and employees. When considering who will hold key positions within your company, consider the person’s reputation (both in general and within the specific industry), the experience the person has to offer, and the person’s connections within the community and the industry.
It amazes me how many business owners start their businesses without having any type of agreement in place. A company should always have documents that establish Agreementsbetween officers, employees, vendors, and any other individual and entity that a company enters into a business relationship with. These agreements don’t have to be extensive, but should explain the expectations and the means in which the relationship begins and ends. Each business should also have a document that establishes business procedures for important matters concerning the business, such as who maintains financial control of the company, the succession of officers for the company, and the addition and removal of officers. These documents are particularly important during situations where an officer leaves a company.
No matter how simple the relationship is, agreements are vital to maintaining peace and order within a business. The agreements take the guessing game out of determining what each party understood with regards to a business relationship.
4. Licenses/ Registration–
Another behavior that I have noticed in many new businesses is the absence of the proper licenses and registrations. This is highly dangerous and the absence of these items puts both the business owner and the business into serious jeopardy.
Every business must be registered with the state in which it intends to do business. Depending on the type of business established, this step provides a crucial level of protection, also known as the “corporate veil,” which separates the assets, debts, and liabilities of a business from its owners. Having the business registered with the state informs that state of the company’s presence and also lends credibility to the business when customers research the company. If somebody decides to sue your company (God forbid!), you want them to sue your company, not you as an individual. The failure to have the proper registration means that the business actually DOESN’T exist, therefore your personal assets are in jeopardy.
Having the proper licensure for a business is critical, especially for new businesses. The costs associated with some licenses can be expensive, because some licenses are regulated by the federal government, the state of the business, and sometimes the county. However, the costs for not having the proper license can result in hefty monetary fines and may even be severe enough to create criminal charges for the company and its owner.