Steven C. Sasser, P.C.

Attorney and Counselor

So, You Want To Start a Business[1]

Have you ever thought about starting your own business? Many people do. They dream of financial freedom, building a business legacy or just a way to market a new product they have invented or discovered. Whatever reason drives you, there are several important questions and issues that should be addressed.  Addressing these issues prior to starting your business will put you ahead of must business startups and put you one step closer to realizing your business dreams.

Many entrepreneurs have the dream but little idea how to go about starting their business venture. This article will address some of the steps you should take and questions you should answer before you open shop with your new business.  While this article is not intended as a complete discussion of the issues presented, it should give you an idea of the issues involved in a decision to open a new business.

A BUSINESS PLAN:

A written business plan should be an essential part of your pre-business planning strategy. How will you finance your new business venture?  How much will you need to contribute to the business to set it up?  What will be your client base or target audience? How will you reach them?  How many employees will you need? What benefits will you provide your employees?  All of these questions and more are addressed in a business plan.  The plan you develop will serve as a framework for setting up your business and  as a roadmap for operating it.

Whether you use a computer model or a less formal method to prepare your plan, the important thing is that you develop a comprehensive plan before you open the doors to your business.  Your plan should include an analysis of how you will finance your venture.   If you intend on seeking conventional bank financing or investments from venture capitalists or other investors, you must have a business plan before contacting them.  Many bankers will not even consider making a loan to a startup without a detailed business plan. Likewise, it is a minimum requirement with venture capitalists and other outside investors. 

Remember, a properly developed business plan is not a static document.  It will change where necessary to reflect new information you develop from your financial professional, insurance agent, accountant and attorney.  All of these people will provide you with  information beneficial to the development of you plan. Don’t be afraid to ask each of them to review your plan and offer suggestions.

FINANCING:

Now that you have a business plan you can begin the developing your financing plans for your business endeavor.  You may decide you want to fund your business from funds you already have on hand or you may want to borrow money from a conventional lender such as your local bank or finance company.  In a less conventional approach for most small businesses, you may want to seek funding from venture capitalists or other outside investors.  No matter which avenue you choose, you should take time to thoroughly investigate your choice to insure it meets your objectives and fits with you business plan projections.

Should you choose to fund your business from funds you have on hand, you will need to determine how much you will need to get the business started and to provide funding for the business and your family until your business becomes profitable.  This approach usually requires a longer period of time than other types of financing but may ultimately prove to be the least expensive of the options.  Advice on planning how much you will need for your new business can be obtained from your accountant, attorney or from sources available at your local public library, Chamber of Commerce or business incubator. 

Conventional borrowed financing is probably the most common form of financing for startup businesses. Under this approach, you will develop a relationship with a bank or finance company and borrow the funds you need for the business.  If you are planning to use this method, you should begin by contacting lending officers specializing in business financing.  Most banks have these officers and they are usually anxious to develop relationships with promising startups.  By choosing a loan officer that specializes in business financing, you will have access to bank products geared toward businesses and not individuals.  As your business grows, you will need additional products and services that these officers can develop for you.

When looking for financing you should talk with several lenders to compare products and services.  Before meeting with any potential lender, you should develop your business plan and take it with you to your meetings.  Loan officers may prepare their own financial projections regarding your business but they will need to review your plans before considering financing.  They may also be able to suggest areas of improvement for your plan.  Look at your lender as a partner in developing your business.

The consideration of venture capital investment or outside investors is one that is outside the scope of this article.  Suffice it to say that if you are considering this type of financing, it is probably the most expense alternative and will require the most in planning and development.  Before pursuing this type of financing, you should contact an attorney experienced in this area and invest in a portion of his or her time.  He or she can steer you in the right direction and help you protect you plans and investment.  This is not an area where you should try and go it alone.

ACCOUNTING ISSUES:

We always recommend that new startups (and existing businesses for that matter) use a certified public accountant (CPA) for all business financial matters.  This is in no way intended as a criticism of non-certified accountants or bookkeepers and is not meant to imply that you must have a CPA to run your business.  The reason for our recommendation is that CPAs are trained to deal with business issues and are required to submit to yearly continuing education training to stay current on laws and regulations. Non-certified accountants may not be.  CPA’s are also current on various tax and finance issues related to businesses and are thus better able suggest ways to reduce tax liability. Your CPA can also work with your attorney to suggest the best business form for you business.  Money spent for a CPA is usually money well spent.  Factor it into your budget, you will be glad you did.

LEGAL ISSUES:

Your attorney should be an integral part of your business planning.  He or she will not only be able to help develop your business plan, but will also be able to discuss with you the type of legal vehicle which best suits your plan.  Do you need limited liability? Do you want limited liability coupled with taxation as a partnership? Do you want to admit new partners of stockholders at a later date?  Will you have foreign investors of shareholders? All of these questions are the type that should be addressed with your attorney.  They will help determine whether a corporation, limited liability company, limited liability partnership or other entity is best for you.

It is important that your attorney be involved from the start.  He or she can offer suggestions for bankers, accountants and insurance agents.  He can suggest ways to change and improve your business plan.  She can assist you in dealing with investors and structuring any financing deals you may want to be involved in.  The use of an attorney experienced in business planning and development will pay dividends when it comes time to open your new business.

The involvement of your attorney should not end with the setting up of your business vehicle. It should continue throughout out the life of your business.   Your attorney can be a source of information and services for many business issues you may encounter and for insuring your business stays on firm legal ground.  Like with the use of a CPA, the involvement of your attorney will be well worth any monetary investment made.

CONCLUSION:

As noted above, this article is not intended to be a complete examination of all issues involved in starting a business.  It should, however, serve to identify several steps to use in planning your business.  Remember, not everyone is an expert on all aspects of starting a business.  There are, however, answers available.  Don’t be afraid to ask for assistance. The resources are available for you.   

The decision to  undertake a new business venture is one of the most important many people will make.  Take your time and plan.  It will help get your business off to the best start possible. We are available to assist you with any of the above information or to provide contacts with many of the professionals described above

Comments or questions regarding this article should be directed to Steven C. Sasser at ssasser@ssasser.com