Have you ever considered or are you considering starting your own business? The process can be daunting, tumultuous and confusing... However, if done right, starting your own business can be simple, efficient, exciting- as well as lucrative & fulfilling!
Tiffany Ballenger Floyd, a Nevada attorney who works with new & experienced business owners offers this advice: “One of the most common mistakes I see new entrepreneurs make is failing to first create a business plan… you wouldn’t build a house without a blueprint, and the same is true of your business! It doesn’t matter if you’re starting a lemonade stand or a multinational corporation- no matter the size of your company, a business plan will help keep you focused & on track.”
To get you started, we've outlined some major items to consider before diving in…
Step 1: Look at the Big Picture!
What do you envision when you think of your business? How do you want to present your products and/or services? Are you looking to turn a side-hustle into a full-time business? While it’s obviously important to figure out the intricate details, the first step should deciding on the overall tone & impression you’re striving for- your “brand”.
It’s likely that if you are reading this, you already know what kind of business you want to start- but what are the potential roadblocks?
- Who is your competition?
- What do you like about your competitors?
- What do you want to do differently?
- What will set YOUR business apart from the pack?
- What’s your target market/audience?
- How do you reach them?
- How will you communicate your “brand” to potential customers/clients?
- Can you carve out a specific niche?
- Can you expand upon that niche? Are there other audiences you haven’t considered?
Delving deeper into these issues will make you a more effective business owner and will help to mitigate problems that can easily be avoided with initial research.
Step 2: Make sure your “Brand” is YOURS… Intellectual Property!
Once you’ve chosen your ideal business name & branding, you must make sure your name is available- the first step is online research (trademarks, business names, web domains already in use), but go beyond Google!
United States Patent and Trademark Office’s (USPTO) Trademark Database
This database allows you to search for any existing marks are similar to yours (used on related products/services). You can search for patents as well as trademarked words & images. If you suspect a conflict, you need to proceed with caution- check the status to see if the application or registration is still “live” (“Dead” marks can’t be used to block a new application). You can always consult a trademark/intellectual property attorney if you have questions, or to help you with the trademark process
The last thing you want is to set up a business only to find out that someone else has the same name or a trademark and you’re infringing- this is a common (& very costly) mistake that can be easily avoided with careful planning.
Step 3: Budget, Budget, Budget… Your Money and Your Time!
Taking an honest look at how your personal financial situation relates to the business is a huge consideration & can prove daunting. Obviously, preparing for up-front costs is necessary, as well as providing for a “cushion” of operating costs (until the business turns a profit) is crucial.
In order to do so, we recommend preparing a detailed prospective budget, including careful research & estimates of projected business expenses (i.e. costs related to formation of the business entity, initial inventory, deposits on storefronts/office space, website management/creation, marketing materials, insurance, legal/accounting services, etc.). Realistic budgeting of each potential cost will give you a bottom line that you MUST have in order to start, so you’ll be able to know if you can self-finance (or if you will need to seek out a loan or investors). If you have investors contributing to your business, it would be prudent and beneficial to outline, from the start, what their role in the company will be. Calculate your start-up costs here.
Ideally, start-ups should plan on having at least six months of reserves set-aside; however, for some industries, it may take much longer to realize a profit. Conversely, some start-ups can remain lean (many service/web based businesses), and as such, less of a cushion is necessary. When budgeting, seek to overestimate costs & under-estimate your profit, so you limit unhappy surprises as you start out.
A huge consideration that should be covered in your initial budget is man (or woman) hours…How much time will you have to contribute to the creation and running of your business? Having a realistic expectation of the time required & your associated availability- especially if you are currently employed elsewhere- is crucial. Many new entrepreneurs drastically underestimate the amount of time the new business requires early-on and/or make the mistake of trying to do everything themselves. Outsource whatever you can- experts are there for a reason! It can be very penny-wise & pound-foolish to attempt to DIY every aspect of your business- many times you’ll either burnout, or end up working for about $0.25/hour.
Additionally, setting proper expectations with your partners, employees, & independent contractors will not only ease your own time-burden, but will also set the tone for how the business will be ran from the get-go. Know that managing your time and your partners/employees can be difficult, especially if they family/friends or former colleagues. It’s wise to think about the kind of boss you want to be and research various leading styles to help you achieve your management persona. Read more on this here.
Step 4: Forming Your Company – Choosing the Best Legal Structure for Your Business
Deciding how to organize the business, legally, will help determine the internal structure of your business. Think about your personal estate as well and how the business fits into your estate & estate planning: it’s imperative that ensure that your personal & business funds are kept separate- do not commingle! Mixing personal and business finances will only lead to trouble, so putting a comprehensive plan together before the business is actually organized is highly recommended.
Below are some commonly used business organizations types:
| Limited Liability Company (LLC) | One of the most commonly used entity formations (especially in Nevada), an LLC is composed of members (owners) and managers (operators). One of the main upsides to holding your business as an LLC is exactly as stated- it limits your (personal) liability. As the LLC is a separate and distinct legal entity, its members should be shielded from personal liability against potential claims made against the business. LLC’s are also favored due to their flexibility in taxation treatment, as they can be taxed as a disregarded entity (single members), a partnership, S-Corp or as a C-Corp. Nevada is frequently heralded as one of the best states to form an LLC, as our laws are incredibly business-friendly & members enjoy increased liability protection (over many other states). |
| Corporation | Filing as a Corporation, like an LLC, limits your personal liability, but unlike an LLC, Corporations MUST be taxed as either and S-Corp or a C-Corp. Also, if you want to allow for shareholders to trade and purchase on the public exchange market, you would have to file as a C-Corporation and therefore would be subject to the SEC (Securities and Exchanges Commission) rules and procedures. Corporations are comprised of officers and shareholders, and can be privately or publicly held. For most small-mid size businesses, LLCs are now favored over a traditional corporation. |
| Partnerships | Partnerships formations are now less common than LLC’s or Corporations as they do not limit the personal liability of the business owner (or “General Partner”).A partnership can be easier to set up in that it can be established without a filing with the state, however for obvious liability reasons, this is not recommended. In a partnership entity, the decisions and action of one partner may be imputed to the other partner. Also, a liability on behalf of the business can be imputed to the general partners personally. |
| Limited Liability Partnership (LLP) | Set up just like an LLC, but with both partnership and corporation characteristics. The partners have limited liability joint and severally, and the decisions and acts of one partner do not necessarily impute to the other partner. |
Hiring an experienced business formation attorney to assist with the initial formation of your business can relieve help with many of these considerations & may be much more cost-effective than you may think.
Step 5: Open Your Doors & Get the Word Out… Marketing!
Okay, you have your business organized, and are ready to start taking on the world! Before we let you go, let’s talk about marketing. As earlier stated, research is KEY! Learn about your business, who your business appeals to and where your type of business thrives the most. If you can budget for it, hiring a marketing professional can provide you with a statistical analysis for setting up your business to reach the most people on social media, through web and magazine ads, etc. However, if this is not a budget item, you can research yourself and develop your own marketing strategy, it is a big time investment that will be invaluable for your business. Try to create specific goals & targets within your business plan so that measure the effectiveness of your efforts.
In today's environment, some sort of online presence is a necessity. Having an understanding of how to manage your webpage will be helpful, and sites such as Wix, Weebly, and GoDaddy are very informative and present you with a step-by-step guide to build a simple website. However, if your website needs to be more advanced or interactive (i.e. online store, etc.), it may be wise to seek assistance from a web developer (it will probably be more cost effective than figuring it out yourself, and you’ll likely end up with a more professional result).
Of course, word of mouth is an ever-present and powerful marketing tool, and one you should not be afraid to tap into. Getting out in your community can not only bring your business attention, but can also help you, as a business owner, network with other business owners and leaders in the community who may prefer using your business based on the personal connection alone.
We hit on some major items to think about before starting a business. Don’t let fear or lack of knowledge deter you from being a savvy entrepreneur, and remember: every successful business started with just an idea! We’re always here to help you to set your business up in a way that will be the most beneficial in the long run. Ready. Set. Go.
-by Laura Bown (Law Clerk/JD Candidate, 2018, Boyd School of Law, UNLV) with Tiffany Ballenger Floyd, Esq. (Nevada & California Estate Planning Attorney), © 2017, Phillips Ballenger, PLLC
Photo by Christina @ wocintechchat.com on Unsplash