[Start-Ups 101] A QuickStart Guide to Starting your Business in 2020
Do you have a great idea for a new product or service? If so, 2020 is the year for you to start your new business. This QuickStart guide for starting a business provides you with the basic steps to create a new company to protect your idea and give you the structure you need to turn your idea into a reality. A DC fractional general counsel can provide guidance and support throughout each step up the process.
10 Foundational Steps For Starting A Business
1. Market Research And Feedback
To succeed, you need a service or a product that people are willing to purchase. Therefore, one of your first steps in starting a new business is to conduct market research and obtain feedback on your idea for a product or service. There needs to be a demand for your product or service.
You also need to ensure that you are not creating a copy of something that is already on the market or creating something very similar to what is already available within the market. If the market is already saturated with a product or service, your company is less likely to be profitable and successful. Discover who your competitors are and how they are performing within the market.
Depending on your skills and experience, you may need assistance with market research. However, you can begin by obtaining feedback from friends and family. Ask them what they would pay for your product or service and whether or not your product or service addresses a specific need.
2. Choose A Name And Business Structure
Before you offer your product or service for sale, you need to make your company official. Choose a unique name for your company that describes your product or service. Researching your name with the Secretary of State's office guarantees that you choose a name that is available and not too closely related to another company name. In most states, you can reserve a company name for a small fee so that no one uses your company name before you create the legal entity for your company.
Once you have the name for your company, choose the business structure for your company. The business structure for your company impacts several important aspects of daily operations. It also impacts important elements of operating a business, including taxation and personal liability. Common business structures for companies include sole proprietorships, limited liability companies (LLCs), corporations, and partnerships.
Discussing the pros and cons of each type of business structure with an attorney before choosing the legal entity for your new company is a wise step. An attorney can help you choose the business structure that gives you the personal liability protection you desire while providing the best benefits for taxation and ease of daily operations. An attorney can also assist you with completing and filing the paperwork to create the legal entity for your company.
Common business structures for companies include sole proprietorships, limited liability companies (LLCs), corporations, and partnerships.
3. Complete Business Setup
After creating the legal entity for your company, you need to complete the business set up. Depending on your needs and requirements, setting up your business may include, but is not limited to, these steps:
· Obtain a federal tax identification number (FEIN)
· Obtain state tax identification number
· Apply for licenses and permits
· Draft company operating agreement or bylaws
· Open company bank accounts
· Choose an accounting system for your company
· Obtain various insurance policies, including liability insurance
4. Protect Your Idea
Take steps to protect your idea from being used without your permission. Obtaining the necessary trademarks and patents is only one step you must take to protect your idea. Protect your intellectual property by creating non-disclosure agreements and confidentiality agreements for employees, vendors, and other third parties.
Always identify and label trade secrets and other protected information as confidential. Institute employee training and set up a policy to protect trade secrets. Monitor where information is stored and limit access to sensitive information. Encrypt data on computers and require logins and passwords to access sensitive in protected information.
5. Create A Business Plan
A business plan provides a road map for your company. The plan should cover the various phases of your company, including the start-up phase, funding, establishment, and business growth. If you intend to seek financial support for your company, investors and lenders want to see a traditional business plan. If you are funding your business idea from personal funds, a simple business plan outlining your goals and how you intend to reach those goals can be sufficient and effective to guide you through the initial stages of setting up your company and getting it off the ground.
A traditional business plan for a company typically includes:
· Executive summary
· Company description
· Description of products or services
· Market analysis and competitive analysis
· Financial analysis and projections
· Description of organization in management
· Sales strategy and marketing plan
· Funding request
· Supporting documentation and information
Creating an effective business plan can be an essential step in obtaining the funding you need for your company. It's beneficial to consult a legal professional when creating your business plan to ensure that you include all information necessary to attract investors and lenders.
Creating an effective business plan can be an essential step in obtaining the funding you need for your company.
6. Funding Your Business
There are several ways to fund your new business venture. Using your own money to fund your new company is often called bootstrapping. Bootstrapping means you are starting your business with little to no outside capital. It requires you to be frugal and carefully budget because you have little money to work with as you begin your new company. Companies that start as bootstrap ventures can transition into other forms of funding as the company expands.
Other forms of funding for your company may include:
Personal loans
Friends and family
Co-founders
Angel investors
Business lines of credit
Crowdfunding campaigns
Small business grants
Small business loans
Venture capital investors
Before you seek funding for your company, determine how much funding you will need. Your vision for your company and your personal financial situation are the top two elements that impact the funding you need to begin your company.
7. Decide Where To Launch Your Company
Do you need a storefront for your company or will you be launching your company online? The answer to this question is critical for several reasons. Whether you have a brick and mortar company or an online company directly affects several key business aspects, including but not limited to:
· Start-up costs
· Access to your target markets
· Customer and consumer relationships
· Overhead and operating costs
· Taxes
· Availability of investors and funding
· Employees
Companies are not limited to only one model. While a brick and mortar or physical location for your company may provide the advantages you need when first launching your company, you can also establish an online presence for your company.
In today's market, companies need an online presence to attract a growing number of consumers who use the Internet to locate and purchase goods and services that are local and across the nation. Therefore, have a plan for launching your company online as well as in a physical location. It is equally important to monitor your online presence, especially your company reviews and reputation.
8. Build Your Team
Your company may begin as a one-person operation, but it is also prudent to begin building your business team as soon as possible. Your business team will help you advance your company to the next level.
Initially, your business team may be limited to cofounders and a few employees and professionals. However, as your company grows, your team may expand to include:
· Lawyers
· Accountants
· Marketing professionals
· Customer service representatives
· Information technology experts
· Board of advisors
· Management professionals
· Fundraising experts
Growing a successful business can depend largely on the team members you choose to work with you as you build your business. Remember to always check an individual or company’s reviews, qualifications, experience, and reputation before hiring them to work for your company. You only want qualified and dedicated team members working with you to ensure your company's success.
“You only want qualified and dedicated team members working with you to ensure your company’s success. ”
— Steve Thienel
9. Promote Your Company
Marketing your company is the key to your company's success in growth. You must be able to reach your target market to sell your products and services. A marketing professional may be helpful in creating a marketing plan that not only reaches your target market but also expands your products and services into related markets.
Even though many startup companies have a limited budget for marketing, it can be a wise investment to work with a marketing professional early when creating your new company. If you cannot attract consumers, your company will not get off the ground. Therefore, increasing your marketing budget during the early stages of your startup can give you the advantage you need over other companies who may ignore the benefits and necessity of a strong marketing strategy.
10. Maintain Corporate Structure
Once your company is off the ground and operating, it's easy to overlook the corporate formalities of operating your business, especially if you are bootstrapping or handling many of the business operations and responsibilities yourself. However, maintaining separation between your company's finances and your personal finances is crucial. It also is important to maintain the corporate formalities required by state law, such as holding board meetings, maintaining accurate books and records, and filing all company tax returns and required annual entity filings. The required formalities depend on the business structure you chose for your company.
“Increasing your marketing budget during the early stages of your startup can give you the advantage you need over other companies who may ignore the benefits and necessity of a strong marketing strategy. ”
— Steve Thienel
Failing to maintain corporate formalities and separation between personal finances and company finances can cause the loss of personal liability protection and certain tax advantages. By maintaining your corporate structure, you can avoid some of the legal issues and problems that plague many startups.
Get Help for Your New Startup from a DC Fractional General Counsel
Having an attorney serve as general counsel for your company can help avoid some of the pitfalls that many entrepreneurs encounter when starting a new company. Reasons to hire a lawyer for your startup include:
· Guidance on turning your business idea into a reality
· Assistance in protecting intellectual property
· Legal advice on employment matters, including hiring new employees, employment contracts, subcontractors, employee compensation and benefits, and firing employees
· Choosing a company structure and registering your company
· Advise on compliance issues and assistance obtaining required licenses and permits
· Drafting and reviewing contracts
· Assistance in and legal advice regarding raising capital
· Drafting partnership agreements, bylaws, and operating agreements
The above list is just a small sample of the areas in which a general counsel can be helpful for a startup. However, many startups do not have the funds available to hire a full-time general counsel. If you are concerned with the cost of hiring an attorney for your company, you might hire a fractional general counsel.
A fractional general counsel is a part-time attorney for your company. Together you create a plan for deliverables and expectations for your relationship, which then translates into a set fee schedule moving forward. You get exactly what you need from your counsel – proactive business advice designed to save you money in the long run, at a rate that makes sense.
Because the attorney works for your company on a consistent basis, the attorney learns and is intimately familiar with the daily operations and the needs of your company. The attorney also develops a personal relationship with you and the members of your team. This relationship allows the attorney to provide tailored advice to you and your company. By having a general counsel on your staff, you have a legal professional always available to provide guidance and support in every aspect of your business.
A fractional general counsel agreement can be tailored to fit the needs and budget of your company. Most entrepreneurs quickly realize the benefits of hiring a general counsel for their startup are well worth the investment. Contact DC fractional general counsel Steve Thienel today for more information about our services for startups.
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