Preparing to Start Your Own Businessby Marc Anthony Douthit, Douthit, Murray & Pierre, P.A.
America is a country which was founded on the entrepreneurial spirit of individuals who were determined to make their fortune through their own business enterprises. This spirit still runs deeply through the American psyche. One need only look at the numbers of people who have their own businesses to know that people still believe strongly that many opportunities exist for someone to pursue their own business enterprise.
Unfortunately, far too often the small business owner is deterred by things that have nothing to do with how good or bad their product or service might be, but rather by factors such as insufficient capitalization, no marketing plan, lack of access to key markets and no logistical or administrative support. Overcoming these barriers will be the key to the long term success of the business.
Developing a strategic plan for the business is probably the single most important step you must take in preparing to start your business. It would probably amaze you to find out the number of people who are actually in business that do not have a clear answer to the question: So what does your business do? If the business owner doesn't know the answer to this question, chances are the customers won't have any answers either. Knowing the who, what, when, where and how of your business is crucial.
After you have a clear understanding of what your business is actually going to do, you should look to figuring out how to go about creating, structuring and financing the business. For most small businesses, the initial financing comes from the savings and earnings of the business owner. It is not uncommon that entrepreneurs begin the operation of their business while still employed at other jobs. This arrangement continues until the entrepreneur believes that the business venture can replace the salary from their employment. If the entrepreneur is not funding the venture themselves, then the funding often comes from friends and family and other “close” investors who believe not only in the business enterprise, but also in the entrepreneur.
Certainly there is also funding available through traditional loans or outside investors, but this kind of funding, particularly for start up businesses is difficult to obtain and the “cost of the money” is usually very high. Additionally, many investors often will insist on some management role in the business in order to preserve their investment.
The importance of proper capitalization cannot be stressed. Lack of funding is probably the single biggest reason that small businesses fail within the first three (3) years of operation. The other major reason for the failure of the business is that an entrepreneur make come to the conclusion, that after all is said and done, all they have done is replaced their salary and they are working twice as hard to earn the same money.
The legal structure of the business is something that should be discussed with your lawyer or accountant. Your particular circumstances will determine whether to operate as a sole proprietorship, a partnership, a corporation, a limited liability company, or other entity. Each has their own advantages and disadvantages and you have the find the one that suits your needs. Once the decision is made, then the appropriate paperwork must filed with the Secretary of State and the filing fees paid.
Setting up some sort of structure is important, because depending on the type of business you have, there may be some potential liability to the entrepreneur for things that may go wrong or for debts of the business. There are ways to create a legal structure that will limit the ability of creditors of the business to go after the personal assets of the entrepreneur.
After you have developed a strategic plan, secured adequate capitalization and set up the appropriate legal structure, then you can begin the process of putting the strategic plan into place. Following the budget that you have developed as a part of your strategic plan, you can look to begin to take the steps necessary to operate the business. Whether it be renting an office, purchasing inventory, obtaining the proper licensing, hiring employees, preparing marketing materials or the rest of the many things that must be done in order to open your doors, you want to ensure that the day you open, you are fully prepared to do all of the things that are called for in your strategic plan. Very little could be worse than to open the doors of your business, get a customer or client and then, not be able to deliver on the product or service you are offering.
Owning your own business is an exciting way to make a living and an entrepreneur can potentially reap huge rewards for their labors, but the proper preparation is necessary to ensure long term success.
About the Author - Marc Anthony Douthit is a Partner in the law firm of Douthit, Murray & Pierre, P.A., located in North Miami. He has practiced in the area of small business development and corporate law for the past 12 years. He is a Professor of Business Law at the Andreas School of Business at Barry University.