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.
Where he added, i love, throughout
yes i am jon
Having a tight nit business team available to you at all times when you build your business is essential.
Entreprenuers can’t do everything so they must hire people in the fields in which they need more technical advice beyond the idea of their business.
If you don’t have the solid team in place…and it comes time to expand and deal with the new inflow of business…without accountants, lawyers, and bankers….your business could flounder…
I just wrote about this concept on my blog about why “C Students Rule The World”…focusing on leveraging themselves by hiring people that are smarter than them in other areas such as accounting and law.
Have a great day!
I would love to do a link exchange with you if you are open to it!
I was wondering if you would be interested in linking my blog on your site. I will add your site to my blog in kind. Thank you.
These are two good Australian sites with information about establishing and running a business –
A very informative article. I have a similar post focusing on how to hire the right attorney for your business. Perhaps it would be helpful to your readers. See http://www.rushonbusiness.com/2006/05/how_to_hire_the.html
Keep up the great work with your blog.
There are many good points in your article. I would like to supplement them with some information.
For an all-volunteer site, dedicated to small businesses who wish to succeed in federal government contracting, please see the below site:
The federal government will contract in excess of $80B to small businesses in the next fiscal year.
There are over 50 agencies or “Departments” in the federal government. Each of these agencies has a statutory obligation to contract from small business for over 20% of everything it buys.
Contracting officers must file reports annually demonstrating they have fulfilled this requirement. Not fulfilling the requirement can put agency annual funding in jeopardy. Small business has a motivated customer in federal government contracting officers and buyers.
Large business, under federal procurement law, must prepare and submit annual “Small Business Contracting Plans” for approval by the local Defense Contract Management Area Office (DCMAO) nearest their headquarters. These plans must include auditable statistics regarding the previous 12 month period in terms of contracting to small businesses and the goals forecast for the next year.
The federal government can legally terminate a contract in a large business for not meeting small business contracting goals. Approved small business plans must accompany large business contract proposals submitted to federal government agencies. Small businesses have motivated customers in large business subcontract managers, administrators and buyers.
There are set-aside opportunities available for small entities,veterans, disabled veterans, women and minorities. All it takes is navigating the system, persistance, asking questions, registering, marketing, teaming and working hard.
Small Business America is good at that.
The business side of Micro-ISV
One of my favorite bloggers, Pamela Slim over at Escape from Cubicle Nation, tackled today four startup business questions micro-ISV need to answer too:
Should I set up my business as a S Corporation or a LLC? (Two examples of U.S.-based business stru…
Hey, you have a great blog here! I’m definitely going to bookmark you!
I have a Business Education and Business Link site. It pretty much covers everything you need to know to start a businss and general entrepreneural related stuff.
Come and check it out if you get time 🙂