I get a lot of questions about very specific areas of setting up a small business such as:
- Should I set up my business as a S Corporation or a LLC? (Two examples of U.S.-based business structures)
- Do I need liability insurance?
- Should I make people sign a non-disclosure agreement if I share details about my product or business model?
- Should I set up my books on a cash or accrual basis?
These are all great questions for which I have a singular response:
Don’t follow my advice, talk to a professional.
I certainly have opinions, but this is very different than understanding the details of your business and the myriad of (always changing) laws and regulations that govern it. Many an unhappy entrepreneur has gotten into hot water because they “followed Uncle Bill’s advice” instead of investing money in a lawyer (nothing against Uncle Bill). Startup Nation talks about the “big four” professionals every entrepreneur needs to run an effective business:
- A lawyer
- An accountant
- A banker
- An insurance specialist
These professionals can ensure that you set up a solid foundation for your business. Often, entrepreneurs try to “bootstrap” everything and only call in an expert when they are in trouble. Investing in the right professional advice early on can save you headaches, or worse, in the long run.
Since most of the “big four” have high hourly rates, to get the most out of your investment, be very prepared for your meeting and come with specific questions. If you can describe the nature of your business, your target market and your products and services in a succinct way, they will be able to get you the information that you need more quickly.
So how do you find these professionals if you don’t know any personally?
- Ask successful businesspeople in your field whom they recommend. We found our very competent accountant by asking our trusted insurance agent.
- Search for professional directories like the The American Institute of Certified Public Accountants or the Small Business Law Firms .
- Contact your local Small Business Association and ask for referrals
- Search for members in your local Better Business Bureau.
- Don’t sign up with the first person that fits your criteria. Startup Nation has specific questions to ask each of your “big four,” similar to these for a prospective accountant:
- Do you specialize in businesses like mine?
- Are you qualified to prepare income tax returns as well as keep my books?
- Can you provide me with references from clients similar to me?
- Can you explain your fee structure?
- Are you a CPA (certified public accountant)?
I realize that cash flow is king when you are starting a business. It can be painful to write a big check to a professional when you may want to use the money to develop a prototype or invest in marketing. In the long run, however, you will be happy that you set things up the right way. No one should endure the heartbreaking loss of someone stealing your intellectual property, face the agony of huge tax adjustments in favor of your government when it is discovered that your accounting was inaccurate, or deal with the frightening experience of a lawsuit that puts your personal assets at risk.
I realize that most of the resources listed are U.S.-based. If you have recommendations for your corner of the world, please share them in the comments.